Introduction to Accounting Week 4
Introduction to Accounting Week 4 MGMT 200
Popular in Introductory Accounting
verified elite notetaker
Popular in Business
This 2 page Class Notes was uploaded by Rachel Rozow on Friday September 16, 2016. The Class Notes belongs to MGMT 200 at Purdue University taught by Frank T. Kane in Fall 2016. Since its upload, it has received 13 views. For similar materials see Introductory Accounting in Business at Purdue University.
Reviews for Introduction to Accounting Week 4
Report this Material
What is Karma?
Karma is the currency of StudySoup.
Date Created: 09/16/16
Accounting Week 4 Remember: Assets Account increase on the debit side and decrease on the credit side Liabilities and Equity Accounts increase on credit and decrease on debit Keep the functions of the accounting equation in mind Post transactions on the general ledger: Posting the process of transferring the debit and credit information to the appropriate sheets Expense recognition: anticipating the costs of an event and dealing with them before the event takes place these are not recorded until the revenue is generated from said event These costs may include salaries of employees, purchase of supplies, and estimated costs involved with fuel The difference between accrualbasis and cashbasis accounting lies in the timing of when revenues and expenses are incurred and recorded A company using and not paying accumulating an expense would be a good example of an accrual, whereas the payment of cash for something that is not used immediately would apply to cashbasis accounting Cashbasis accounting violates revenue recognition, so it is not accepted when recording financial transactions Monthly financial statements in monthly, twomonth or threemonth, quarter, and year are expected from a business entity, complicating the process for accountants. They have to still prepare reports for the month alone in addition to any significant time period that may have passed. Ex end of the year will include the twelfth month, the final quarter, the end of year… Deferrals: Prepaid expenses pay cash to purchase an asset in the current period that will be recorded as an expense in a future period(s) Deferred Revenues receive cash in the current period that will be recorded as a revenue un a future period(s) Accruals: Accrued expenses record an expense in the current period that wull be paid in cash in a future period(s) Accrued revenues record a revenue in the current period that will be collected in cash in a future period(s) 1) Asset and Expense allocating recorded costs between two or more accounting periods 2) Expense and Liability recognizing unrecorded expenses 3) Revenue and Liability allocating recorded unearned revenues between two or more accounting periods 4) Revenue and Asset recognizing unrecorded earned revenues Adjusting entries always involve at the least one income statement account and one balance sheet account, forcing it to be a part of the statements Adjusting entries allow for proper recognition of revenues and expenses before both sides of their impact can be completely accounted for Prepayments occur when the payment is made before the expenses can be recognized