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Financial Accounting John J. Wild Seventh Edition Copyright © 2015 McGraw­Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw­Hill Education. Chapter 3 Adjusting Accounts for Financial Statements C2, P1 Adjusting Accounts An adjusting entry is recorded to bring an asset or liability account balance to its proper amount as well as update any related revenue or expense Framework for Adjustments Adjustments Paid (or received) cash before expense (or revenue) recognized Paid (or received) cash after expense (or revenue) recognized Prepaid (Deferred) expenses* Unearned (Deferred) revenues Accrued expenses Accrued revenues *including depreciation 3­3 A1 Links to Financial Statements Summary of Adjustmentsand Financial Statement Links Before Adjustment Type Prepaid Expenses Unearned Revenues Balance Sheet Account Asset Overstated Equity Overstated Liability Overstated Equity Understated Income Statement Account Expense Understated Revenue Understated Adjusting Entry Dr. Expense Cr. Asset Dr. Liability Cr. Revenue Accrued Liability Understated Expense Dr. Expense Expenses Accrued Revenues Equity Overstated Asset Understated Equity Understated Understated Revenue Understated Cr. Liability Dr. Asset Cr. Revenue 3­4 P2 FastForward – Computing the Adjusted Trial Balance - December 31, 2013 The adjusted trial balance combines the unadjusted trial balance account balances with the adjustments we make. 3­5 ... - tailieumienphi.vn
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