Chapter 3: Adjusting accounts of fin statements

Describe the abbreviated steps in the accounting cycle and when they occur

1. Analyze - daily

2. Record - daily

3. Adjust - at the end of acct period

4. Report -at the end of acct period

5. Close - at the end of acct period

Provide an overview of the accounts are found in the general ledger

Assets, Liabilities, Equity, Revenue and Income, and Expenses.

List 5 potential Asset accounts

Cash, Accts receivable, Other receivables, Security deposit, Prepaid Insurance, Fixtures and Equipment, and Accumulated Depreciation (contra asset)

List potential Liability accounts

Accts payable, Interest Payable, Wages Payable, Taxes Payable, Gift card/Subscription liabilities, Notes Payable

List Equity accounts

Common Stock

Retained Earnings

List potential Revenue and Income accounts in the GL

Sales Revenue and Interest Income

List potential accounts under Expenses

Cost of Goods Sold, wage Expense, Rent expenses, Advertising expense, depreciation expense fixtures and equipment, insurance expense, tax expense

What’s the difference between a general journal and a general ledger?

Journal - tabular record of activities captured in debits and credits

General ledger - list all accounts and balances ALERE

Describe the processes of journalizing and posting

Journalist - record a transaction in debits and credits

Post - after journalized, debits and credits are transferred to GL Accts

Which accounts carry a normal credit balance?

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Liabilities, Common Stock, Revenue

How are credits and debits affected for accounts with normal credit balances? (LCSR)

Credit increases and debit decreases

What accounts carry normal debit balances?

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Assets, Dividends , and Expenses

What does it mean to purchase items on account?

The item is documented as a liability, the account name is accounts (acct) payable

What does it mean when someone purchases a good on credit?

They are purchasing the good and will provide the cash later. The transaction is recorded as an account receivable and is considered a non-cash asset

What’s an example of a transaction where unearned/deferred revenue is documented journalized?

Purchase of a subscription or membership that spans more than the evaluation period e.g. customers purchase a 6 month fitness pass.

Describe when to journalize asset depreciation and asset expenses.

Depreciation can be documented for company owned assets

Expenses are documented for leased or rented assets

True or False: Dividends appear on income statements

FALSE;

What accounts get closed into equity?

Temporary accounts; Revenue and Expenses