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How To Properly Adjust Your Books – Accrual Basis

How To Properly Adjust Your Books – Accrual Basis . What is An Adjusting Entry? Why Do We Adjust? How Do We Adjust – Theory? Road Map – The Martinelli Apple Juice Tree Approach! Examples. What Is An Adjusting Entry?. Looks Just Like A Regular Entry, But It Has Special Qualities!

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How To Properly Adjust Your Books – Accrual Basis

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  1. How To Properly Adjust Your Books – Accrual Basis What is An Adjusting Entry? Why Do We Adjust? How Do We Adjust – Theory? Road Map – The Martinelli Apple Juice Tree Approach! Examples

  2. What Is An Adjusting Entry? Looks Just Like A Regular Entry, But It Has Special Qualities! Based on GAAP Based on Accounting Assumptions and Constraints

  3. What Does An Adjusting Entry Look Like? 1. Last day of reporting period Date 12/31/08 Supplies Exp 450 Supplies 450 2. 1 account is debited with a debit amount 3. 1 account is credited wit a credit amount

  4. Accounting Theory Concepts Assumptions Information Qualities Principles Constraints

  5. Information Qualities Reliable Info – Verifiable Relevant Info – To Decision Timely

  6. The 5 Basic Accounting Assumptions Ethics Assumption Economic Entity Assumption Monetary Assumption Going Concern Assumption Time Period Assumption

  7. Why Do We Prepare Adjusting Entries? Better Reporting of Results and Operations Better Reporting of Financial Position Cash Basis Versus Accrual Basis

  8. How Do We Prepare Adjusting Entries? GAAP Revenue Recognition Expense Recognition

  9. Constraints Materiality Conservatism Comparability Consistency Cost - Benefit

  10. What Happens If We Do Not Prepare Adjusting Entries? Understate Revenues / Expenses Period Income Not Up-to-date Overstate Liabilities / Assets Financial Position Not Up-to-date Owners Equity Also Not Up-to-date

  11. How Do You Prepare An Adjusting Entry? Must know how costs flow through the system Refer to source documents used to prepare cash transaction entries related Is it logical? Makes sense.

  12. How About A Shortcut? • No Way! • No Magic Formula Here – Sorry! • Lets Use The Martinelli Apple Juice Tree Approach!

  13. 5 Traits of All Adjusting Entries

  14. 2 Major Categories of Adjusting Entries

  15. Examples - Major Categories of Adjusting Entries

  16. One Other Category of Adjustments – Estimating

  17. How To Properly Adjust Your Books – Conclusion You Now Know How To Adjust And Why – Better Information No Magic Pill Thru Death Valley But There is A Way Out – The Martinelli Apple Juice Tree Approach! An Escape Out!

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