| (TCO B) Adjusting Entries: Data relating to the balances of various accounts affected by adjusting or closing entries appear below. (The entries which caused the…
“Adjusting entries ensure that revenue recognition and matching principles are followed (Kimmel P. 3.4).” Revenue recognition means that revenue should be recognized at the time the revenue was earned. Matching principle is when the expense that was put into making that revenue is recognized when the revenue occurs. Adjusting entries are important because when making a trial balance at any time it is not a for sure that all the entries are up to date so adjusting is required. Adjusting entries are either made in the deferrals section or accruals. Deferrals are when cash is given or received but the work for the cash has not been done. Accruals are when cash is when work is done but cash is not sent or received. Adjusting…
Journalize & Post Adjustments – End of period adjustments are required in order to bring the accounts to their proper balance. Once you have reviewed any and all transactions or events not posted yet you will be able to begin the adjustment. Revenue falls under accrual accounting and it is recorded when it is earned and expenses are recorded when they are incurred. In some instances an entry may be required at the end of the period to record any revenue that was earned by not yet posted to the books. With that being said an adjustment may be required to record any expense that may not have been recorded…
* Accrual basis accounting uses the adjusting process to recognize revenues when earned and to match expenses with revenue.…
There have been several concepts learned and discussed that will be beneficial to persons holding positions in the accounting field. Some skills required to be successful are; differentiating between accrual-basis and cash-basis accounting, detailing what creating adjusting entries entails, and the logistics of preparing an adjusted trial balance.…
Adjusting entries are necessary in accrual accounting because recognition of revenues and expenses does not always correspond with cash flows. Some economic changes may occur that should be reflected under accrual accounting but that are not triggered by exchanges with external parties. As a result adjusting entries are needed to reflect these changes. Adjusting entries are not required in a cash accounting system because recording is triggered only by the exchange of cash, and so revenues and expenses always correspond with cash…
The steps of accounting cycles are revenues, expenditures, conversion/ production, financing, fixed assets, and financial reporting. Revenues most often occur as the result of the selling of a service or product. These transactions are recorded in the form of cash receipts and sales orders. Expenditures are a result of the materials and labor need to generate revenues. For example a dry cleaning business would need certain chemicals, bags and hangers for cleaned clothes, and employees to operate the business. Conversion represents the production or the good or service sold by the company. In other terms the time/ cost to produce and market the good or service. Financing is also known as and outstanding debt, such as stocks or any outstanding bonds. The fixed asset details the purchase, disposition, and depreciation of company assets. Once all journal entries have been posted and all accounts closed a trial balance is prepared and is used to identify errors and eventually prepare the financial reporting for the company. Accounting systems have become more automated and the need for human intervention is becoming more limited. Automation of these systems does allow for increased efficiency and accuracy and has allowed manual accounting task to be performed more quickly. Human intervention is necessary though to ensure the data being entered is correct. Human intervention can also help to identify errors that may have been made in the initial inputting of information. As technology evolves it is…
The next step is making all the necessary adjusting entries. Some of these entries might be supplies, prepaid insurance, wage & salary expenses, unearned revenue, fees earned, accounts receivable and depreciation expenses.…
As a newly hired Staff I there will be a responsibility to analyze the work papers for the organization’s clients. In this situation a client is not clear about why a Staff I is asking for information on adjusting lower of cost or market inventory valuation, capitalizing interest on building construction, recording gain or loss on asset disposal, and adjusting goodwill for impairment and requires explanations on these topics. An explanation of each is provided to include sources from accounting websites, Generally Accepted Accounting Principles (GAAP), and accounting pronouncements. In addition to the explanation for each accounting practice there is also an explanation of the impact it will have on the financial statements and examples of calculations to aid with real-world application.…
The importance of knowing how to adjust entries is to ensure that the revenue and matching principles are followed (Kimmel, Weygandt, & Kieso, 2009). It is necessary because when a trial balance is prepared, the information may not be current. The adjustments need to be made when financial statements are prepared because it is counter-productive to record some events on a daily basis. The entries affected by adjusting entries are prepaid expenses, insurance, depreciation, and supplies (Kimmel, Weygandt, & Kieso, 2009).…
When the organization provides a service it will then record the income earned. The same process applies when a purchase is made, and it will record the expense. This method is helpful for an organization that wants to keep track of income and expenses as they occur. With the modified accrual basis, the income earned is recorded just like in full accrual accounting however; when an expense occurs, it will only be recorded when it has been paid. This method allows for more financial flexibility since expenses are not recorded until…
The information my organization request is important for us to better understand how the adjustment of the information on inventory valuation, interest capitalization, recording gain or loss on asset disposal and goodwill impairment are done. It is important for us to understand the accounting procedures being used so we can identify this information and determine if compliance with the accounting principles is coherent with Generally Accepted Accounting Principles (GAAP). If a conclusion is reached that the organization accounting principles are conflicting, then the proper adjustments will have to be made to avoid any compliance issues with the Generally Accepted Accounting Principles (GAAP). These topics will be explained to clarify the proper treatment of these items based on FASB standards and the reasoning for the requested review.…
Even though accrual and deferred entries are the major type of entries there are four type of adjusting entries that you need to know about. The four adjusting entries are: prepaid expenses, which include depreciation expenses; unearned revenues; accrued expense; and accrued revenues.(Editorial Board, 2012) I will provide you the meaning and example of the manufacturing industry for each of the…
Calculating Depreciation Expense per year under Straight Line Method when cost, estimated residual value and estimated useful life are given.…
ABFA1023 FUNDAMENTALS OF ACCOUNTING 1 Revision on Inventory Adjustments New practice question 2 questions: Does the good belong to us? o If yes, include in our closing inventory o If no, exclude from our closing inventory Axis Trading Sdn.…