Impact of Adjusted Entriesby Group 1.ppt

Katie Katie Katie Katie Katie Katie F Michael Michael Emily Emily Fei Fei Katie and Fei Chapter 3-* Impact of Adjusted Entriesby Group 1 Fernando Casco-Downing, Katie Fleming, Michael Kubik, Emily Stone, Fei Wang Introduction Accounting Equation (A= L + SE) Accounting Cycle Accounting Concepts Revenue Expense Revenue Recognition Matching Principle Types of Adjusted Entries Examples of Adjusted Entries Impact without entries The Accounting Equation Relationship among the assets, liabilities and stockholders’ equity of a business: The equation must be in balance after every transaction. For every Debit there must be a Credit. Illustration 3-3 The Accounting Cycle Transactions 1. Journalization 6. Financial Statements 7. Closing entries 8. Post-closing trail balance 9. Reversing entries 3. Trial balance 2. Posting 5. Adjusted trial balance 4. Adjustments Work Sheet Illustration 3-6 Adjusting Entries Revenues - recorded in the period in which they are earned. Expenses - recognized in the period in which they are incurred. Adjusting entries - needed to ensure that the revenue recognition and matching principles are followed. Types of Adjusting Entries 1. Prepaid Expenses. Expenses paid in cash and recorded as assets before they are used or consumed. Prepayments 3. Accrued Revenues. Revenues earned but not yet received in cash or recorded. 4. Accrued Expenses. Expenses incurred but not yet paid in cash or recorded. 2. Unearned Revenues. Revenues received in cash and recorded as liabilities before they are earned. Accruals Illustration 3-20 Expedient Recording Method Expedient Records an expense upon payment of cash before goods or services are consumed Records revenue upon receipt of cash before goods or services are provided Debit Credit Service Revenue 45,000 Debit Credit Cash 45,000 45,000 Expedient General Entries Q1 : On December 1, 2011, Johnson received a $45,000 payment for services to be rendered equally over a four-month period. Serv