Accounting Principles

Slides:



Advertisements
Similar presentations
Review of the Accounting Process INTERMEDIATE ACCOUNTING I CHAPTER 2 This presentation is under development.
Advertisements

Principles of Financial Accounting
Adjusting the Accounts
ADJUSTING THE ACCOUNTS
TIME PERIOD ASSUMPTION
ADJUSTING THE ACCOUNTS Unit 3 TIME PERIOD ASSUMPTION The time period (or periodicity) assumption assumes that the economic life of a business can be.
Prepared by: Carole Bowman, Sheridan College
ADJUSTING THE ACCOUNTS CHAPTER 9 What are Adjustments?  Adjustments are exactly what the name suggests:  they are adjustments made to the books of.
Prepared by: Carole Bowman, Sheridan College
STUDY OBJECTIVES After studying this chapter, you should understand: Time period assumptionAdjusting entries for prepayments Accrual basis of accountingAdjusting.
1 Financial Accounting: Tools for Business Decision Making, 2nd Ed. Kimmel, Weygandt, Kieso ELS.
ADJUSTING THE ACCOUNTS Accounting Principles, Eighth Edition
ADJUSTING THE ACCOUNTS Accounting Principles, Eighth Edition
Adjusting the Accounts
Accounting Principles, 6e Weygandt, Kieso, & Kimmel
Dr. Mohamed A. Hamada Lecturer of Accounting Information Systems 1-1 Chapter 6 Adjusting the Accounts.
1 Financial Accounting: Tools for Business Decision Making Kimmel, Weygandt, Kieso, Trenholm KIMMEL.
ACCOUNTING PRINCIPLES SIXTH CANADIAN EDITION Prepared by: Debbie Musil Kwantlen Polytechnic University Chapter 3 Adjusting the Accounts.
Unit 1.3 Adjusting the Accounts The time period (or periodicity) assumption assumes that the economic life of a business can be divided into artificial.
John Wiley & Sons, Inc. © 2005 Chapter 3 Adjusting the Accounts Accounting Principles, 7 th Edition Weygandt Kieso Kimmel.
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.
SOME ADJUSTING ENTRIES CLARIFIED. PREPAYMENTS Prepaid Expenses Expenses paid in cash and recorded as assets before they are used or consumed i.e. prepaid.
WEYGANDT. KIESO. KIMMEL. TRENHOLM. KINNEAR. BARLOW. ATKINS PRINCIPLES OF FINANCIAL ACCOUNTING CANADIAN EDITION Chapter 3 Adjusting the Accounts Prepared.
Spiceland | Thomas | Herrmann Financial Accounting Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without.
Adjusting the Accounts –Part I Accounting Principles, Ninth Edition Introduction to Accounting.
Weygandt, Kieso, Kimmel, Trenholm, Kinnear Accounting Principles, Third Canadian Edition © 2009 John Wiley & Sons Canada, Ltd. Prepared by: Debbie Musil.
John Wiley & Sons, Inc. Financial Accounting, 3e Weygandt, Kieso, & Kimmel Prepared by Gregory K. Lowry Mercer University Marianne Bradford The University.
ADJUSTING THE ACCOUNTS
John Wiley & Sons, Inc. © 2005 Chapter 3 Adjusting the Accounts Accounting Principles, 7 th Edition Weygandt Kieso Kimmel Prepared by Naomi Karolinski.
ADJUSTING THE ACCOUNTS
CHAPTER 4: ACCRUAL ACCOUNTING CONCEPTS
Accrual Accounting Concepts
Accounting Principles Second Canadian Edition Prepared by: Carole Bowman, Sheridan College Edited by: Carolyn Doering, HHSS Weygandt · Kieso · Kimmel.
Spiceland | Thomas | Herrmann Financial Accounting Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without.
Accounting & Financial Reporting BUSG 503 Michael Dimond.
3-1 CHAPTER3 Adjusting the Accounts. 3-2  Generally a month, a quarter, or a year.  Also known as the “Periodicity Assumption” Timing Issues Accountants.
Prepared by Kurt M. Hull, MBA CPA California State University, Los Angeles Financial A ccounting, 5e John Wiley & Sons, Inc. Weygandt, Kieso, & Kimmel.
Adjusting Entries Acct 202 Chapter 3 - Day 1. Deferred Expenses Paid two years’ rent in advance, $24,000 Prepaid Rent $24,000 Rent Expense for 1 month-1,000.
Types of Adjusting Entries
Hospitality Financial Accounting Week 3 Adjusting the Accounts Matakuliah: V0232 – Akuntansi Keuangan Hotel Tahun: 2009.
3-1 3 Learning Objectives After studying this chapter, you should be able to: [1] Explain the time period assumption. [2] Explain the accrual basis of.
LECTURES 8 & 9 ADJUSTING THE ACCOUNTS. LEARNING OBJECTIVES 1.Explain the time period assumption. 2.Explain the accrual basis of accounting. 3.Explain.
Chapter 3-1 Adjusting the Accounts Accounting Principles, Ninth Edition.
Accrual Accounting Concepts Kimmel ● Weygandt ● Kieso Financial Accounting, Eighth Edition 4.
Weygandt, Kieso, Kimmel, Trenholm, Kinnear Accounting Principles, Fifth Canadian Edition © 2010 John Wiley & Sons Canada, Ltd. Prepared by: Debbie Musil.
Chapter 3-1 CHAPTER 3 ADJUSTING THE ACCOUNTS Accounting Principles, Eighth Edition.
Adjustments are based on three generally accepted accounting principles: Timeliness principle. Revenue recognition principle. Matching principle. GAAP.
Chapter 4 Adjusting the Accounts. 2 Describe the nature of the adjusting process.
Chapter 3-1. Chapter 3-2 Adjusting the Accounts Accounting Principles, Ninth Edition.
CHAPTER3 Adjusting the Accounts  Generally a month, a quarter, or a year.  Also known as the “Periodicity Assumption” Timing Issues.
Chapter 4 Adjusting the Accounts. 2 Describe the nature of the adjusting process.
ACCT 201 FINANCIAL REPORTING Chapter 3
ACCRUAL ACCOUNTING CONCEPTS
Financial Accounting: Tools for Business Decision Making, 3rd Ed.
Adjusting the Accounts
3 Adjusting the Accounts Learning Objectives
Adjusting the Accounts
CHAPTER3 Adjusting the Accounts. CHAPTER3 Adjusting the Accounts.
ADJUSTING THE ACCOUNTS
Financial Accounting, 5e California State University,
Types of Adjusting Entries
Accounts in English Adjusting Entries.
Accrual Accounting & Adjusting Entries
Accrual Accounting Concepts
ACCRUALS AND DEFERRALS
ADJUSTING THE ACCOUNTS
The Adjusting Process LO 1 – Understanding the Nature of the Adjusting Process.
LO 1 – Understanding the Nature of the Adjusting Process
WILEY IFRS EDITION Prepared by Coby Harmon
Presentation transcript:

Accounting Principles Weygandt Keiso Kimmel 7th Edition Chapter - 1

Accounting time periods are generally a month, a quarter, or a year. The time period (or periodicity) assumption assumes that the economic life of a business can be divided into artificial time periods. Accounting time periods are generally a month, a quarter, or a year. The accounting time period of one year in length is referred to as a fiscal year. Time period assumption

The revenue recognition and matching principles are used under the accrual basis of accounting. Under cash basis accounting, revenue is recorded when cash is received, and expenses are recorded when cash is paid. Generally accepted accounting principles require accrual basis accounting because the cash basis often causes misleading financial statements. Accrual basis and Cash basis

Accrual basis and Cash basis The revenue recognition and matching principles are used under the accrual basis of accounting. Under cash basis accounting, revenue is recorded when cash is received, and expenses are recorded when cash is paid. Generally accepted accounting principles require accrual basis accounting because the cash basis often causes misleading financial statements.

The revenue recognition principle dictates that revenue be recognized in the accounting period in which it is earned. Revenue recognision In a service business, revenue is considered to be earned at the time the service is performed.

Matching principle The practice of expense recognition is referred to as the matching principle. The matching principle dictates that efforts (expenses) be matched with accomplishments (revenues). Revenues earned this month expenses incurred in earning the revenue are offset against....

Matching principle The practice of expense recognition is referred to as the matching principle. The matching principle dictates that efforts (expenses) be matched with accomplishments (revenues). Revenues earned this month expenses incurred in earning the revenue are offset against....

Generally accepted accounting principles Relationship between revenue recognition and matching principle Time-Period Assumption Economic life of business can be divided into artificial time periods Generally accepted accounting principles Revenue-Recognition Principle Matching Principle Expenses matched with revenues in the same period when efforts are expended to generate revenues Revenue recognized in the accounting period in which it is earned Adjusting entries are required for these two principles

Adjusting entries are required each time financial statements are prepared. Need Types Adjusting entries

Adjusting entries are required each time financial statements are prepared. Need Types

Adjusting entries are made in order for: 1. Revenues to be recorded in the period in which they are earned, and for...... 2. Expenses to be recognized in the period in which they are incurred. Need Types

Adjusting entries are made in order for: 1. Revenues to be recorded in the period in which they are earned, and for...... 2. Expenses to be recognized in the period in which they are incurred. Adjusting entries can be classified as 1. prepayments (prepaid expenses or unearned revenues) 2. accruals (accrued revenues or accrued expenses) Need Types

Liabilities overstated Revenue understated Liabilities Dr. Type of Adjustment Account Relationship Accounts before Adjustment Adjusting Entry Prepaid Assets and Expense Assets overstated Expense understated Expenses Dr. Assets Cr. Unearned Liabilities and Revenue Liabilities overstated Revenue understated Liabilities Dr. Revenues Cr. Summary Accrued Revenue Assets and Revenue Assets understated Revenue understated Assets Dr. Revenues Cr. Accrued Expense Liabilities and Expense Expense understated Liabilities understated Expense Dr. Liabilities Cr.