ACT 205 - End of THe Accounting Period
ACT 205 - End of THe Accounting Period ACT 205
Popular in Fundamentals of Accounting
Popular in Department
This 3 page Class Notes was uploaded by zaadams Notetaker on Friday September 16, 2016. The Class Notes belongs to ACT 205 at Colorado State University taught by Sally Plasterer Whitney in Fall 2016. Since its upload, it has received 3 views.
Reviews for ACT 205 - End of THe Accounting Period
Report this Material
What is Karma?
Karma is the currency of StudySoup.
You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!
Date Created: 09/16/16
Week 4: Accounting 205 - Sally Whitney Chapter 3 – The Accounting Cycle: End of the Period The Accounting Period The income statement reports the firm’s revenues for the fiscal year Fiscal Year – the 12-month accounting period used by a company o The fiscal year does not need to align with the calendar year Revenue Recognition Rule – You DO NOT record revenue until you provide goods or services to the customer Matching Principle – expenses are recorded in the same period as the revenues they help generate o If you can’t match them, put them in the period they occur Point of Accrual basis Cash basis Difference Revenue When goods and When cash is Recognition services are received provided Expense In the period cost When cash is paid Recognition are used GAAP Part of GAAP Not Part of GAAP ***You don’t have to use Accrual if you are a private non- traded company*** Adjusting Journal Entries Why adjust? o To account for supplies that are used daily, earning interest, prepaid rent expiring. Four Types o Prepaid expenses Assets- they have some future benefit We expense these costs in the future as we use the asset Always Debit an expense account and credit an asset account Examples- Prepaid rent, supplies, Equipment (long-term assets) o Deferred Revenues When we get money from a customer up front and provide the service to them later Once the obligation is met, revenue can be recorded Always Debit a liability account and credit a revenue account Examples- You pay for an airline flight, months in advance; Magazine subscriptions, o Accrued Expenses Recorded when a company has a cost that is used to help produce revenue Cost is recorded as an expense Debit an expense account and credit a liability Example – paying utilities, paying employees o Accrued Revenues When a company provides products or services but haven’t received cash yet Debit an asset account and credit a revenue account The Adjusted Trial Balance o After all, adjusting entries are made o Used to prove the equity of total debit balances and total credit balances Current Note = < 1 year 2 Long-term Note = > 1 year The Closing Process o Remember – revenue, expenses, and dividends are components of Retained earnings o Revenue, expenses, and dividends and temp accounts (reset after we prepare the financial documents) Closing Entries o Transfer balances of all temp accounts to zero 3
Are you sure you want to buy this material for
You're already Subscribed!
Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'