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Sessions 3-4 Adjusting Journal Entries and Closing Entries

Sessions 3-4 Adjusting Journal Entries and Closing Entries. Measuring Transactions-The Basics. At least two account The integrity of the accounting equation Debits (left-side entries) = Credits (right-side entries. Measuring Transactions-Methodology. Determine the accounts

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Sessions 3-4 Adjusting Journal Entries and Closing Entries

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  1. Sessions 3-4Adjusting Journal Entries and Closing Entries FINANCIAL ACTG. - BUS 020 - FALL 2014

  2. Measuring Transactions-The Basics • At least two account • The integrity of the accounting equation • Debits (left-side entries) = Credits (right-side entries FINANCIAL ACTG. - BUS 020 - FALL 2014

  3. Measuring Transactions-Methodology • Determine the accounts • Determine the direction of the exchange • Determine the amounts • Note pages 54- 71 very carefully FINANCIAL ACTG. - BUS 020 - FALL 2014

  4. The “T-Account” ASSETS & EXPENSES LIABILITIES, EQUITY & REVENUES Debit Credit Debit Credit FINANCIAL ACTG. - BUS 020 - FALL 2014

  5. Accounting Process-Detail • Analyze Transaction (Exchange) • Measure and Record • Summarize Accounts • Unadjusted Trial Balance • Adjusting Journal Entries (AJE’s) • Adjusted Trial Balance • Prepare Income Statement • Closing Entries • Final Trial Balance • Prepare Balance Sheet, SCF and SSE Focus on 9/3 Focus on 9/5 FINANCIAL ACTG. - BUS 020 - FALL 2014

  6. Adjusting Journal Entries • Accruals • Prepayments • Accruals/Deferrrals • Unearned Revenue • Cost Expirations FINANCIAL ACTG. - BUS 020 - FALL 2014

  7. Close Worksheet FINANCIAL ACTG. - BUS 020 - FALL 2014

  8. Closing Entries • Temporary accounts • Zero them out • Revenue, expenses and dividends • Permanent accounts • Retained earnings is the final location for the temporary accounts FINANCIAL ACTG. - BUS 020 - FALL 2014

  9. Financial Statement Preparation • Headings are IMPORTANT • Company, Title and Date • Note how the T-Account balances track to the actual financial statements FINANCIAL ACTG. - BUS 020 - FALL 2014

  10. Financial Statement Relationships Stmt of Sharehldrs Eq. Balance Sheet Income Statement Statement of Cash Flows Current Assets Non- current Assets Current Liabilities Long- term Debt Equity Revenue Cost of Goods Sold (COGS) Gross Margin Operating Exps. Net Income Operating Cash Investing Cash Financing Cash Change in Cash Beginning Cash Ending Cash Beginning S/E Net Income Less: Dividends Ending S/E FINANCIAL ACTG. - BUS 020 - FALL 2014

  11. Competencies by Session 4 • What are the primary financial statements in the F/S Package? • What are their uses? • What are the other key components of the F/S Package? • What are their uses? • Describe the Financial Accounting Model. • What is the accounting equation? • Relate it to the Balance Sheet. • Relate it to the Income Statement. • What is Statement of Financial Accounting Concepts #1 (SFAC #1)? • What are the financial accounting assumptions? • What are the financial accounting principles? FINANCIAL ACTG. - BUS 020 - FALL 2014

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