Adjusting Entries purpose of adjusting entries Prepaid expenses Unearned revenue Accrued expenses Accrued revenue T he purpose of adjusting entries For purposes of measuring income and preparing financial statements the life of a business is divided into a series of accounting per ID: 778631
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Slide1
Accounts in English
Adjusting Entries
Slide2Adjusting Entries
purpose of adjusting entries.
Prepaid expenses.
Unearned revenue.
Accrued expenses.
Accrued revenue.
Slide3T
he
purpose of adjusting entries
For
purposes of measuring income and preparing financial statements, the life of a business is divided into a series of accounting periods This practice enables decision makers to company, the financial statements of successive periods and to identify significant trends. But measuring net income for a relatively short accounting period such as a month even a year poses a
problem
because
some business activities affect the revenue and expenses of multiple accounting periods. Therefore, adjusting entries needed at the end of each accounting period to make certain that appropriate amounts of revenue and expense are reported in the company's income statement.
Slide4Prepaid expenses.
Prepaid expenses: Expenses paid
in cash and specific more accounting
period.
There are two methods to treatment the adjusting
entries:
Assets method: used or Expenses paid in cash and recorded as assets before they are
consumed.
Expense method Expanses paid in cash and recorded as expenses before they are used or (consumed
).
Slide5Accrued Expenses/payable expenses
Accrued expenses are expenses incurred but not yet paid or recorded at the statement
date.
Accrued expenses result from the same causes as accrued revenues and include interest, rent, taxes and
salaries.
Slide6Unearned Revenue
Revenue received in cash specifies more accounting
period.
There are two method to treatment the adjusting
entries:-
Liabilities Method Revenues received in cash and recorded as a liabilities before they are
earned.
Revenue Method Revenue received in cash and recorded as revenue before they are earned.
Slide7Accrued revenue Receivable revenue
Revenue earned but not yet received in cash or record