Bài giảng Financial Accounting - Chapter 3: The Accounting Cycle: End of the Period

The AccountingCycle:End of the Period Chapter 3 Learning ObjectivesUnderstand when revenues and expenses are recorded Distinguish between accrual-basis and cash-basis accountingDemonstrate the purposes and recording of adjusting entriesPost adjusting entries and prepare an adjusted trial balanceLearning ObjectivesPrepare financial statements using the adjusted trial balanceDemonstrate the purposes and recording of closing entriesPost closing entries and prepare a post-closing trial balancePart AAccrual-Basis Accounting3-4Learning Objective 1Understand when revenues and expenses are recorded3-5Revenue and Expense ReportingRevenue recognitionRecognize revenue when it is earnedExpense recognitionExpenses are reported with the revenues they help to generateRevenue recognition principleMatching principleLearning Objective 2Distinguish between accrual-basis and cash-basis accounting3-7Accrual-Basis Compared with Cash-Basis AccountingPoint of DifferenceAccrual BasisCash BasisRevenue RecognitionWhen revenue is earnedWhen cash is receivedRecording ExpensesWith related revenuesWhen cash is paidGAAPPart of GAAPNot a part of GAAPPart BThe Measurement Process3-9Learning Objective 3Demonstrate the purposes and recording of adjusting entries3-10Illustration 3.4—The Accounting CycleAdjusting EntriesPrepaymentsPrepaid expensesUnearned revenuesAccrualsAccrued expensesAccrued revenuesPurpose of Adjusting EntriesTo account for transactions that have not been recorded by the end of the periodTo record revenues in the period earnedTo record expenses in the period they are incurred to generate those revenuesTo correctly state assets and liabilitiesPrepaid ExpensesCost of assets acquired in one period that will be expensed in a future periodUnearned RevenuesCash received in advance from a customer for products or services to be provided in the futureAccrued ExpensesCompany has incurred a cost but hasn’t yet paid cash or recorded an obligationAccrued RevenuesRevenue earned but hasn’t yet received cash or recorded an amount receivableLearning Objective 4Post adjusting entries and prepare an adjusted trial balance3-18Adjusted Trial BalanceLists all account balances after updating them for adjusting entriesPrepared after posting the adjusting entries to the general ledgerPart CThe Reporting Process:Financial Statements3-20Learning Objective 5Prepare financial statements using the adjusted trial balance3-21Illustration 3.11—Relationship between Adjusted Trial Balance and Financial StatementsStatement of Cash FlowsThe final financial statementMeasures activities involving cash receipts and cash paymentsReflecting a company’s operating, investing, and financing activities.Part DThe Closing Process3-24Learning Objective 6Demonstrate the purposes and recording ofclosing entries3-25Closing EntriesTo transfer the balances of temporary accounts to the Retained EarningsTo reduce the balances of these temporary accounts to zeroLearning Objective 7Post closing entries and prepare a post-closing trial balance3-27Post-Closing Trial BalanceLists all accounts balances after updating for closing entries.Prepared accounts for the next periodEnd of Chapter 33-29