Power Notes Chapter 3 Learning Objectives

Slides:

Advertisements

Similar presentations

C3 - 1 Learning Objectives 1. The Matching Concept 2. Nature of the Adjusting Process 3. Recording Adjusting Entries 4. Summary of Adjustment Process 5.Financial.

Advertisements

C3 - 1 Learning Objectives Power Notes The Matching Concept and the Adjusting Process The Matching Concept and the Adjusting Process 1. The Matching Concept.

C2 - 1 Learning Objectives 1.Usefulness of an Account 2.Characteristics of an Account 3.Analyzing and Summarizing Transactions 4.Illustration of Analyzing.

Power Notes Chapter F2 Learning Objectives C2 Analyzing Transactions

C4 - 1 Learning Objectives Power Notes Completing the Accounting Cycle Completing the Accounting Cycle 1.Work Sheet 2.Financial Statements 3.Adjusting.

The Adjusting Process ACG 2021 Chapter 3.

Completing the Accounting Cycle

Question Answer Accounting I Debits & Credits Analyzing.

C2 - 1 Learning Objectives 1.Usefulness of an Account 2.Characteristics of an Account 3.Analyzing and Summarizing Transactions 4.Illustration of Analyzing.

Irwin/McGraw-Hill © The McGraw-Hill Companies, Inc., 1999 Accounting Records and Systems © The McGraw-Hill Companies, Inc., Part One: Financial.

Chapter 3  Completing the Accounting Cycle. Chapter 3Mugan-Akman Accounting Cycle Analyze and record the transactions Post the transactions.

Adjusting Entries. Measuring Business Income n Accounting period assumption n Cash accounting versus accrual accounting n Matching principle n Materiality.

The Matching Concept and the Adjusting Process

Chapter 3 The Adjusting Process PRINCIPLES OF FINANCIAL ACCOUNTING

Measuring Business Income: The Adjusting Process

3 The Adjusting Process.

Completing the Accounting Cycle

3 The Adjusting Process.

HFT 2403 Chapter 3 Accounting Adjustments. The Need for Adjustments The life of an enterprise is divided into equal segments of time The life of an enterprise.

1 The Adjusting Process 3 Principles of Financial Accounting, 11e Reeve Warren Duchac.

Chapter 4 Completing the Accounting Cycle. The Accounting Work Sheet What is the work sheet? A work sheet is a multi-columned document used by accountants.

Completing the Accounting Cycle – Part I Chapter 4 1.

Prepared by: C. Douglas Cloud Professor Emeritus of Accounting Pepperdine University © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned,

1 4 Completing the Accounting Cycle. 2 After studying this chapter, you should be able to: Completing the Accounting Cycle 1 Describe the flow of accounting.

Journalize transactions. Post entries to the ledger accounts. Prepare trial balance. Make end-of- year adjustments. Prepare adjusted trial balance. Recall.

3-1 3 The Adjusting Process. 3-2 Describe the nature of the adjusting process

Chapter 3 The Adjusting Process.

4 – Completing the Accounting Cycle

@ 2012, Cengage Learning Completing the Accounting Cycle LO 2 – Preparing the Financial Statements.

Adjusting Accounts & Preparing Financial Statements

Prepared by: C. Douglas Cloud Professor Emeritus of Accounting Pepperdine University © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned,

1 The Adjusting Process 3 Student Version Describe the nature of the adjusting process

C6 - 1 Learning Objectives Power Notes 1. Nature of Merchandising Business 2a. Accounting for Purchases 2b. Accounting for Sales 2c. Transportation Costs.

Chapter 3 Lecture 06. Lecture Review Transactions Rules of Debit and Credit Journalizing Posting into Ledgers Balancing the Ledger Accounts Errors Correction.

NETA POWERPOINT PRESENTATIONS TO ACCOMPANY VOLUME 1 Accounting Second Canadian Edition BY WARREN/REEVE/DUCHAC/ELWORTHY/KRISTJANSON/TOBER Adapted by Sheila.

1 1. Describe the nature of the adjusting process. 2. Journalize entries for accounts requiring adjustment. 3. Summarize the adjustment process. 4. Prepare.

© 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license.

Layout of the Accounting Work Sheet Unadjusted Adjustments Adjusted Income Balance Account Title Trial Balance Trial Balance Statement Sheet Dr Cr Dr Cr.

THE ACCOUNTING CYCLE: Closing Entries 1. Previous Lecture 2 Unadjusted Trial Balance Adjustments Adjusted Trial Balance Income statement Balance Sheet.

C3 - 1 Learning Objectives Power Notes The Matching Concept and the Adjusting Process The Matching Concept and the Adjusting Process 1. The Matching Concept.

1 4 Completing the Accounting Cycle Spreadsheet (Work Sheet) Trial Balance AccountsDrCrDrCrDrCr AdjustmentsAdjusted TB Accounts are listed.

Completing the Accounting Cycle Financial and Managerial Accounting

Prepared by: C. Douglas Cloud Professor Emeritus of Accounting Pepperdine University © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned,

Lecture 09 Chapter 04 Completing the Accounting Cycle Task Force Image Gallery clip art included in this electronic presentation is used with the permission.

Lecture 12 Chapter 04 Completing the Accounting Cycle Task Force Image Gallery clip art included in this electronic presentation is used with the permission.

Chapter 3 Accrual Accounting Concepts. Why is Accrual Accounting Needed? Cash received or paid Revenue earned Expense incurred.

Completing the Accounting Cycle

Chapter 3 Lecture 08. Review of Lecture The Matching Concept and the Adjusting Process Reporting Revenues and Expenses Deferred Expenses (Prepaid Expenses)

Warren Reeve Duchac Accounting 26e The Adjusting Process 3 C H A P T E R human/iStock/360/Getty Images.

C4 - 1 Learning Objectives Power Notes Completing the Accounting Cycle Completing the Accounting Cycle 1.Work Sheet 2.Financial Statements 3.Adjusting.

Completing the Accounting Cycle

Adjusting the Accounts

System to Analyze Transactions

Analyzing Transactions

Adjusting Accounts and Preparing Financial Statements

The Matching Concept and the Adjusting Process

Unadjusted Trial Balance

Dec. 20. NetSolutions paid $900 to Executive Supply Co

3 The Adjusting Process Financial Accounting 14e C H A P T E R Warren

Completing the Accounting Cycle

3 The Adjusting Process Financial and Managerial Accounting 13e

Completing the Accounting Cycle

Chapter 3 The Adjusting Process Student Version

ACCRUALS AND DEFERRALS

3 The Adjusting Process Student Version.

Power Notes Chapter F4 Learning Objectives C4

Analyzing Transactions

Completing the Accounting Cycle

Presentation transcript:

Power Notes Chapter 3 Learning Objectives The Matching Concept and the Adjusting Process Learning Objectives 1. The Matching Concept 2. Nature of the Adjusting Process 3. Recording Adjusting Entries 4. Summary of Adjustment Process 5. Financial Analysis and Interpretation C3

Power Notes Chapter 3 The Matching Concept and the Adjusting Process Slide # Power Note Topics 3 6 9 20 36 41 Reporting Revenue and Expense The Matching Concept Trial Balance, Chart of Accounts Deferrals and Accruals Summary of Adjustments Vertical Analysis Note: To select a topic, type the slide # and press Enter.

Reporting Revenue and Expense TWO METHODS Cash Basis of Accounting Accrual Basis of Accounting

Cash Basis of Accounting Revenue reported when cash is received Expense reported when cash is paid Does not properly match revenues and expenses

Accrual Basis of Accounting Revenue reported when earned Expense reported when incurred Properly matches revenues and expenses in determining net income Requires adjusting entries at end of period It just sounds mean – it really isn’t

The Matching Concept Liabilities Assets Owner’s Equity Expenses Debits = Credits Liabilities Assets Owner’s Equity Expenses Revenues

The Matching Concept Liabilities Assets Owner’s Equity Expenses Debits = Credits Liabilities Assets Owner’s Equity Net Income Expenses Revenues

Net income is determined by properly matching expenses and revenues. The Matching Concept Debits = Credits Liabilities Assets Owner’s Equity Net Income Expenses Revenues matching Net income is determined by properly matching expenses and revenues.

Unadjusted Trial Balance NetSolutions Unadjusted Trial Balance December 31, 2002 11 Cash 2,065 12 Accounts Receivable 2,220 14 Supplies 2,000 15 Prepaid Insurance 2,400 17 Land 20,000 18 Office Equipment 1,800 Assets

Unadjusted Trial Balance NetSolutions Unadjusted Trial Balance December 31, 2002 11 Cash 2,065 12 Accounts Receivable 2,220 14 Supplies 2,000 15 Prepaid Insurance 2,400 17 Land 20,000 18 Office Equipment 1,800 21 Accounts Payable 900 23 Unearned Rent 360 Liabilities

Unadjusted Trial Balance NetSolutions Unadjusted Trial Balance December 31, 2002 11 Cash 2,065 12 Accounts Receivable 2,220 14 Supplies 2,000 15 Prepaid Insurance 2,400 17 Land 20,000 18 Office Equipment 1,800 21 Accounts Payable 900 23 Unearned Rent 360 31 Chris Clark, Capital 25,000 32 Chris Clark, Drawing 4,000 Owner’s Equity

Unadjusted Trial Balance NetSolutions Unadjusted Trial Balance December 31, 2002 11 Cash 2,065 12 Accounts Receivable 2,220 14 Supplies 2,000 15 Prepaid Insurance 2,400 17 Land 20,000 18 Office Equipment 1,800 21 Accounts Payable 900 23 Unearned Rent 360 31 Chris Clark, Capital 25,000 32 Chris Clark, Drawing 4,000 41 Fees Earned 16,340 Revenue

Unadjusted Trial Balance NetSolutions Unadjusted Trial Balance December 31, 2002 11 Cash 2,065 12 Accounts Receivable 2,220 14 Supplies 2,000 15 Prepaid Insurance 2,400 17 Land 20,000 18 Office Equipment 1,800 21 Accounts Payable 900 23 Unearned Rent 360 31 Chris Clark, Capital 25,000 32 Chris Clark, Drawing 4,000 41 Fees Earned 16,340 51 Wages Expense 4,275 52 Rent Expense 1,600 54 Utilities Expense 985 55 Supplies Expense 800 59 Miscellaneous Expense 455 42,600 42,600 Expenses

Unadjusted Trial Balance NetSolutions Unadjusted Trial Balance December 31, 2002 11 Cash 2,065 12 Accounts Receivable 2,220 14 Supplies 2,000 15 Prepaid Insurance 2,400 17 Land 20,000 18 Office Equipment 1,800 21 Accounts Payable 900 23 Unearned Rent 360 31 Chris Clark, Capital 25,000 32 Chris Clark, Drawing 4,000 41 Fees Earned 16,340 51 Wages Expense 4,275 52 Rent Expense 1,600 54 Utilities Expense 985 55 Supplies Expense 800 59 Miscellaneous Expense 455 42,600 42,600

Expanded Chart of Accounts NetSolutions Expanded Chart of Accounts Balance Sheet Income Statement 1. Assets 11 Cash 12 Accounts Receivable 14 Supplies 15 Prepaid Insurance 17 Land 18 Office Equipment 19 Accumulated Depreciation 2. Liabilities 21 Accounts Payable 22 Wages Payable 23 Unearned Rent 3. Owner’s Equity 31 Chris Clark, Capital 32 Chris Clark, Drawing 4. Revenue 41 Fees Earned 42 Rent Revenue 5. Expenses 51 Wages Expense 52 Rent Expense 53 Depreciation Expense 54 Utilities Expense 55 Supplies Expense 56 Insurance Expense 59 Miscellaneous Expense

Expanded Chart of Accounts NetSolutions Expanded Chart of Accounts Balance Sheet Income Statement 1. Assets 11 Cash 12 Accounts Receivable 14 Supplies 15 Prepaid Insurance 17 Land 18 Office Equipment 19 Accumulated Depreciation 2. Liabilities 21 Accounts Payable 22 Wages Payable 23 Unearned Rent 3. Owner’s Equity 31 Chris Clark, Capital 32 Chris Clark, Drawing 4. Revenue 41 Fees Earned 42 Rent Revenue 5. Expenses 51 Wages Expense 52 Rent Expense 53 Depreciation Expense 54 Utilities Expense 55 Supplies Expense 56 Insurance Expense 59 Miscellaneous Expense

Expanded Chart of Accounts NetSolutions Expanded Chart of Accounts Balance Sheet Income Statement 1. Assets 11 Cash 12 Accounts Receivable 14 Supplies 15 Prepaid Insurance 17 Land 18 Office Equipment 19 Accumulated Depreciation 2. Liabilities 21 Accounts Payable 22 Wages Payable 23 Unearned Rent 3. Owner’s Equity 31 Chris Clark, Capital 32 Chris Clark, Drawing 4. Revenue 41 Fees Earned 42 Rent Revenue 5. Expenses 51 Wages Expense 52 Rent Expense 53 Depreciation Expense 54 Utilities Expense 55 Supplies Expense 56 Insurance Expense 59 Miscellaneous Expense

Expanded Chart of Accounts NetSolutions Expanded Chart of Accounts Balance Sheet Income Statement 1. Assets 11 Cash 12 Accounts Receivable 14 Supplies 15 Prepaid Insurance 17 Land 18 Office Equipment 19 Accumulated Depreciation 2. Liabilities 21 Accounts Payable 22 Wages Payable 23 Unearned Rent 3. Owner’s Equity 31 Chris Clark, Capital 32 Chris Clark, Drawing 4. Revenue 41 Fees Earned 42 Rent Revenue 5. Expenses 51 Wages Expense 52 Rent Expense 53 Depreciation Expense 54 Utilities Expense 55 Supplies Expense 56 Insurance Expense 59 Miscellaneous Expense

Expanded Chart of Accounts NetSolutions Expanded Chart of Accounts Balance Sheet Income Statement 1. Assets 11 Cash 12 Accounts Receivable 14 Supplies 15 Prepaid Insurance 17 Land 18 Office Equipment 19 Accumulated Depreciation 2. Liabilities 21 Accounts Payable 22 Wages Payable 23 Unearned Rent 3. Owner’s Equity 31 Chris Clark, Capital 32 Chris Clark, Drawing 4. Revenue 41 Fees Earned 42 Rent Revenue 5. Expenses 51 Wages Expense 52 Rent Expense 53 Depreciation Expense 54 Utilities Expense 55 Supplies Expense 56 Insurance Expense 59 Miscellaneous Expense

Adjustments – Deferrals and Accruals Revenues Current Period Future Period Deferrals Cash Received Cash Received Revenue Recorded

Adjustments – Deferrals and Accruals Revenues Current Period Future Period Deferrals Cash Received Cash Received Revenue Recorded Accruals Revenue Recorded Cash Received

Adjustments – Deferrals and Accruals Revenues Current Period Future Period Deferrals Cash Received Cash Received Revenue Recorded Accruals Revenue Recorded Cash Received Expenses Current Period Future Period Deferrals Cash Paid Cash Paid Expense Recorded

Adjustments – Deferrals and Accruals Revenues Current Period Future Period Deferrals Cash Received Cash Received Revenue Recorded Accruals Revenue Recorded Cash Received Expenses Current Period Future Period Deferrals Cash Paid Cash Paid Expense Recorded Accruals Expense Recorded Cash Paid

Adjustments – Deferred Expense On December 1, NetSolutions purchased insurance for 24 months at a cost of $2,400. Example P1 – Purchase initially recorded as an asset. Adjustment A1 – Record insurance used for December, $100. Cash P1..... 2,400 Prepaid Insurance Assets P1..... 2,400 Insurance Expense Expenses

Adjustments – Deferred Expense On December 1, NetSolutions purchased insurance for 24 months at a cost of $2,400. Example P1 – Purchase initially recorded as an asset. Adjustment A1 – Record insurance used for December, $100. Cash P1..... 2,400 Prepaid Insurance Assets P1..... 2,400 A1..... 100 A1 Insurance Expense A1 A1.....100 Expenses

Adjustments – Deferred Expense On December 1, NetSolutions purchased insurance for 24 months at a cost of $2,400. Example P2 – Purchase initially recorded as an expense. Adjustment A2 – Record insurance unused as of December 31. Cash P2..... 2,400 Prepaid Insurance Assets Insurance Expense P2..... 2,400 Expenses

Adjustments – Deferred Expense On December 1, NetSolutions purchased insurance for 24 months at a cost of $2,400. Example P2 – Purchase initially recorded as an expense. Adjustment A2 – Record insurance unused as of December 31. Cash P2..... 2,400 Prepaid Insurance Assets A2..... 2,300 A2 A2 Insurance Expense P2..... 2,400 A2.....2,300 Expenses

Adjustments – Deferred Revenue On December 1, NetSolutions received cash of $360 for three months’ rent beginning December 1. Example S1 – Sale initially recorded as a liability. Adjustment A3 – Record rent earned for December. Cash S1..... 360 Unearned Rent Liabilities S1..... 360 Rent Revenue Revenues

Adjustments – Deferred Revenue On December 1, NetSolutions received cash of $360 for three months’ rent beginning December 1. Example S1 – Sale initially recorded as a liability. Adjustment A3 – Record rent earned for December. Cash S1..... 360 Unearned Rent Liabilities A3..... 120 S1..... 360 A3 A3 Rent Revenue A3.....120 Revenues

Adjustments – Deferred Revenue On December 1, NetSolutions received cash of $360 for three months’ rent beginning December 1. Example S2 – Sale initially recorded as revenue. Adjustment A4 – Record rent unearned as of December 31. Cash S2..... 360 Unearned Rent Liabilities Rent Revenue S2.....360 Revenues

Adjustments – Deferred Revenue On December 1, NetSolutions received cash of $360 for three months’ rent beginning December 1. Example S2 – Sale initially recorded as revenue. Adjustment A4 – Record rent unearned as of December 31. Cash S2..... 360 Unearned Rent Liabilities A4..... 240 A4 A4 Rent Revenue A4..... 240 S2.....360 Revenues

Adjustments – Accrued Expense NetSolutions received employee services for the last two days of December amounting to $250, to be paid later. Adjustment A5 – Record accrued wages of $250. Wages Payable Liabilities Wages Expense Bal.....4,275 Expenses

Adjustments – Accrued Expense NetSolutions received employee services for the last two days of December amounting to $250, to be paid later. Adjustment A5 – Record accrued wages of $250. Wages Payable Liabilities A5..... 250 A5 Wages Expense A5 Bal.....4,275 Expenses A5.....250

Adjustments – Accrued Revenue As of December 31, NetSolutions provided 25 hours of services at $20 per hour to be billed next month. Adjustment A6 – Record accrued fees earned of $500. Accounts Receivable Assets Bal.....2,220 Fees Earned Bal....16,340 Revenues

Adjustments – Accrued Revenue As of December 31, NetSolutions provided 25 hours of services at $20 per hour to be billed next month. Adjustment A6 – Record accrued fees earned of $500. Accounts Receivable Assets Bal.....2,220 A6..... 500 A6 Fees Earned A6 Bal....16,340 Revenues A6.....500

Summary of Adjustments Buying Side Deferred Expenses Assets A1 A2 Expenses Rearranging the Debits

Summary of Adjustments Buying Side Selling Side Deferred Expenses Deferred Revenues Assets Liabilities A1 A2 A3 A4 Expenses Revenues Rearranging the Debits Rearranging the Credits

Summary of Adjustments Buying Side Selling Side Accrued Expenses Liabilities A5 Expenses Adding a New Transaction

Summary of Adjustments Buying Side Selling Side Accrued Expenses Accrued Revenues Liabilities Assets A5 A6 Expenses Revenues Adding a New Transaction Adding a New Transaction

Summary of Adjustments Buying Side Selling Side Deferred Expenses Accrued Expenses Deferred Revenues Accrued Revenues Assets Liabilities Liabilities Assets A1 A2 A5 A3 A4 A6 Expenses Expenses Revenues Revenues Rearranging the Debits Adding a New Transaction Rearranging the Credits Adding a New Transaction

Financial Analysis and Interpretation Objective: Use vertical analysis to compare financial statement items with each other and with industry averages. Comparative Income Statements For the Years Ended December 31, 2003 and 2002 2003 2002 Amount Percent Amount Percent Fees earned $ 187,500 100.0% $ 150,000 100.0% Operating expenses: Wages expense $ 60,000 32.0% $ 45,000 30.0% Rent expense 15,000 8.0 Vertical Analysis: Wages expense $ 60,000 Fees earned $ 187,500 = 32.0%

Power Notes This is the last slide in Chapter 3. Chapter 3 The Matching Concept and the Adjusting Process This is the last slide in Chapter 3. Note: To see the topic slide, type 2 and press Enter.