Accounting Week 5
Accounting Week 5 MGMT 200
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This 2 page Class Notes was uploaded by Rachel Rozow on Saturday September 24, 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 3 views. For similar materials see Introductory Accounting in Business at Purdue University.
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Date Created: 09/24/16
Accounting Week 5 The book value of an asset is the cost of the asset minus the acquired depreciation. Deferred revenues occur when a company receives in advance from customers Cash received is initially recorded as a liability Netflix is a good example of a company that receives deferred revenue because the customers pay for their services in advance. Because of that, the cash is initially recorded as a debit to liability, and then converted to an asset as the service is provided. After that, it is a debit to referred revenue. Accrued expenses are recorded when a company has a cost that used to obtain revenue that has not been paid just yet With accrued expenses, there is an implication of loans so that there is “cash” paid up front, but not necessarily that which belongs to the business entity. With loans comes interest which accumulates in expenses. Adjusting an entry would entail a credit to liabilities. Accrued revenues involve the receipt of cash after the revenue has been earned and an asset has been recorded. Providing goods or services to customers on account is an example of an accrued revenue. Post adjusting entries and prepare an adjusting trial balance: Adjusting trial balance lists all account balances after updating them for adjusting entries prepared after posting the adjusting determine the accounts requiring adjustment, using the unadjusted trial balance record the adjusting entries in the journal post the adjusting entries to the general ledger prepare an adjusted trial balance Once the adjusted trial is complete, financial statements can be made. Assets: current assets investments property, plant, and equipment intangible assets Liabilities: current liabilities longterm liabilities Stockholders’ Equity: contributed capital retained earnings Classified Balance Sheet: Have comparable financial statements from one business entity to another. This is particularly helpful for banks who are looking to pull the numbers from several different sheets at a time. Patents, copyrights, franchises, and trademarks are all examples of intangible assets because they are owned by law (and can be traded in some instances), but aside from documentation, they are not physical. The Closing Process: Closing entries to transfer the balances of all temporary accounts to the balance of retained earnings. With the accounting equation, we are going to take the temporary accounts revenues, expenses, dividends and close them so that the reset to zero. What was contained should be moved to retained earnings (the master account) as credit. The revenue accounts are ultimately debited. Postclosing trial balance The result is demonstrated balance in retained earnings, with no accounts for revenue and expenses.
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