中山大学会计基础lesson04-en.ppt
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1、Lesson 4 Adjusting Accounts for Financial Statement,Task Team of FUNDAMENTAL ACCOUNTING School of Business, Sun Yat-sen University,2,Outline,Describe the purpose of adjusting accounts at the end of the period. Prepare and explain adjusting entries for prepaid expenses, amortization, unearned revenue
2、s, accrued expenses, and accrued revenues. Explain how accounting adjustments link to financial statements. Explain and prepare an adjusted trial balance.,3,Definition: the continued life of a business is divided into time periods of equal length.,Review: Time period concept,4,Review: Revenue Recogn
3、ition Principle,Revenue is recorded at the time it is earned regardless of whether cash or another asset has been exchanged.,5,Review: Matching Principle,Expenses are to be matched in the same accounting period as the revenues they helped to earn.,6,Accrual and cash basis,The accrual basis of accoun
4、ting matches revenues earned with expenses incurred. The cash basis matches revenues received with expenses paid. It is not satisfactory for most businesses because it results in financial statements that are not comparable from period to period, except when the amounts of prepaid, unearned, and acc
5、rued items are not material.,7,Adjust: A Step in Accounting cycle,Now that we have covered the trial balance, lets discuss adjusting entries.,8,Why Need to Adjust,Some events are not evidenced by the obvious documents. the effects of these events are recorded at the end of the accounting period by m
6、eans of adjusting entries. The purpose of adjusting the accounts at the end of period is to make the accounting information comparable from period to period.,9,Why Need to Adjust,Adjustments are based on three generally accepted accounting principles: Time period principle. Revenue recognition princ
7、iple. Matching principle.,10,Type of Adjusting Entries,11,Adjusting Entries Accruals,Accruals occur when revenues have been earned or expenses incurred but no cash has been exchanged.,Example: interest revenue earned during the period but not received until the next period.,12,Adjusting Entries Accr
8、uals,Example: On Jun 1, 2004, Smith Inc. invests $100,000 for a bonds which pays 5% interest per year. Smith Inc. will not receive the interest until March 31, 2005. On December 31, 2004, Smith, Inc. need to make the following entry for the interest earned so far.,13,Adjusting Entries Accrued,Unreco
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