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Introduction to Accounting Week 4

by: Rachel Rozow

Introduction to Accounting Week 4 MGMT 200

Marketplace > Purdue University > Business > MGMT 200 > Introduction to Accounting Week 4
Rachel Rozow

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About this Document

Week four notes for financial accounting
Introductory Accounting
Frank T. Kane
Class Notes
financial accounting, Intro to Accounting, Accounting
25 ?




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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.


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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


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