西方财务会计4
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End of Current Period
Prior Periods Current Period Future Periods
Adjusting Entry Recognizes expense incurred, and Records liability for future payment.
Page 5
Adjusting Entry Recognizes portion of asset consumed as expense, and Reduces balance of asset account.
Adjusting Entries and Timing Differences ——Converting Liabilities to Revenue
End of Current Period Prior Periods Current Period Future Periods
Transaction Collect cash in advance of earning revenue (creates a liability).
Page 6
Adjusted Trial Balance
The financial statements can be prepared directly from the adjusted trial balance.
– Up-to-date (except for the retained earnings account)
Income Taxes in Unprofitable Periods
Dr. Income Taxes Payable Cr. Income Taxes Expense
The company may be able to recover some of the income taxes recognized in prior period.
TAXABLE INCOME INCOME TAX EXPENSE
Before this is paid
EARNED INCURRED
A LIABILITY TO GOVERNMENT TAX AUTHORITIES
Dr. Income Taxes Expense Cr. Income Taxes Payable
Income Taxes Payable Income Tax Refund Receivable ASSET
Page 14
Accruing Income Taxes Expense
Income (Loss) before taxes —Income taxes (Income tax benefits)
Adjusting Entries and Timing Differences ——Converting Assets to Expenses
End of Current Period Prior Periods Current Period Future Periods
Transaction Paid cash in advance of incurring expense (creates an asset).
Page 9
Depreciation
Depreciation is the systematic allocation of the cost of a depreciable asset to expense.
Fixed Asset (debit) On date when initial payment is made . . . Cash (credit)
MATCHING
1.Prepaid Insurance Premium
2. Airline Ticket Sales
3. Salaries 5. Depreciation
4. Interests of bank loan
Interest Earned
A. B. C. D.
Converting assets to expenses Converting liabilities to revenue Accruing unpaid expenses Accruing uncollected revenue
– Often it represents the largest difference between net income and the cash flow from business operations.
Page 11
Accruing Income Taxes Expense P153
Page 3
Types of Adjusting Entries
Converting assets to expenses
Converting liabilities to revenue
Accruing unpaid expenses
Page 4
Accruing uncollected revenue
Depreciation
Depreciation—A Noncash Expense
– Depreciation is a noncash expense.
– As depreciable assets expire, depreciation expense is recorded, net income is reduced, and owners’ equity declines, but there is no corresponding cash outlay in the current period.
Indicate the nature of the following two accounts: (A/L/OE/R/E/P)
Customer Deposit
Page 2
Passenger Revenue
The Need for Adjusting Entries
P140
Certain transactions affect the revenue or expenses of two or more accounting periods. The purpose of adjusting entries is to assign to each accounting period appropriate amounts of and .
Page 20
Biblioteka Baidu
Page 12
Accruing Income Taxes Expense
To record the payment of the liability – Dr. Income taxes payable
–
Cr. Cash
Page 13
Accruing Income Taxes Expense
Net income (Loss)
Income taxes reduce the size of both profits and losses.
Page 15
Adjusting Entries and Accounting Principles
Realization Matching
Direct association of costs with specific revenue transactions Systematic allocation of costs over the useful life of the expenditure
Many companies immediately charge the cost of immaterial items to expense.
Supplies
Page 17
Lightbulbs
The Concept of Materiality
Materiality is a matter of professional judgment
Adjusting Entry Recognizes revenue earned but not yet recorded, and Records receivable.
Page 8
Transaction Collect cash in settlement of receivable.
Page 10
The asset’s usefulness is partially consumed during the period.
Depreciatio n Expense (debit)
At end of period . . .
Accumulated Depreciation (credit)
– The size of the organization
– The cumulative effect of numerous immaterial events
– The nature of the item
Page 18
Effects of the adjusting entries
Page 19
Chapter 4 The Accounting Cycle
Accruals and Deferrals
Chapter Opener – Carnival Corporation
When did Carnival Corporation recognize their revenue?
Please indicate the accounting entries which should be made by Carnival Corporation upon receipt of the passengers‘ payments.
Page 16
The Concept of Materiality
An item is ―material‖ if knowledge of the item might reasonably influence the decisions of users of financial statements.
Adjusting Entry Recognizes portion earned as revenue, and Reduces balance of liability account.
Adjusting Entries and Timing Differences ——Accruing Unpaid Expenses
Page 7
Transaction Pay cash in settlement of liability.
Adjusting Entries and Timing Differences ——Accruing Uncollected Revenue
End of Current Period
Prior Periods Current Period Future Periods
– Like the trial balance, the adjusted trial balance shows that the total of the debit balance accounts is equal to the total of the credit balance accounts.
Prior Periods Current Period Future Periods
Adjusting Entry Recognizes expense incurred, and Records liability for future payment.
Page 5
Adjusting Entry Recognizes portion of asset consumed as expense, and Reduces balance of asset account.
Adjusting Entries and Timing Differences ——Converting Liabilities to Revenue
End of Current Period Prior Periods Current Period Future Periods
Transaction Collect cash in advance of earning revenue (creates a liability).
Page 6
Adjusted Trial Balance
The financial statements can be prepared directly from the adjusted trial balance.
– Up-to-date (except for the retained earnings account)
Income Taxes in Unprofitable Periods
Dr. Income Taxes Payable Cr. Income Taxes Expense
The company may be able to recover some of the income taxes recognized in prior period.
TAXABLE INCOME INCOME TAX EXPENSE
Before this is paid
EARNED INCURRED
A LIABILITY TO GOVERNMENT TAX AUTHORITIES
Dr. Income Taxes Expense Cr. Income Taxes Payable
Income Taxes Payable Income Tax Refund Receivable ASSET
Page 14
Accruing Income Taxes Expense
Income (Loss) before taxes —Income taxes (Income tax benefits)
Adjusting Entries and Timing Differences ——Converting Assets to Expenses
End of Current Period Prior Periods Current Period Future Periods
Transaction Paid cash in advance of incurring expense (creates an asset).
Page 9
Depreciation
Depreciation is the systematic allocation of the cost of a depreciable asset to expense.
Fixed Asset (debit) On date when initial payment is made . . . Cash (credit)
MATCHING
1.Prepaid Insurance Premium
2. Airline Ticket Sales
3. Salaries 5. Depreciation
4. Interests of bank loan
Interest Earned
A. B. C. D.
Converting assets to expenses Converting liabilities to revenue Accruing unpaid expenses Accruing uncollected revenue
– Often it represents the largest difference between net income and the cash flow from business operations.
Page 11
Accruing Income Taxes Expense P153
Page 3
Types of Adjusting Entries
Converting assets to expenses
Converting liabilities to revenue
Accruing unpaid expenses
Page 4
Accruing uncollected revenue
Depreciation
Depreciation—A Noncash Expense
– Depreciation is a noncash expense.
– As depreciable assets expire, depreciation expense is recorded, net income is reduced, and owners’ equity declines, but there is no corresponding cash outlay in the current period.
Indicate the nature of the following two accounts: (A/L/OE/R/E/P)
Customer Deposit
Page 2
Passenger Revenue
The Need for Adjusting Entries
P140
Certain transactions affect the revenue or expenses of two or more accounting periods. The purpose of adjusting entries is to assign to each accounting period appropriate amounts of and .
Page 20
Biblioteka Baidu
Page 12
Accruing Income Taxes Expense
To record the payment of the liability – Dr. Income taxes payable
–
Cr. Cash
Page 13
Accruing Income Taxes Expense
Net income (Loss)
Income taxes reduce the size of both profits and losses.
Page 15
Adjusting Entries and Accounting Principles
Realization Matching
Direct association of costs with specific revenue transactions Systematic allocation of costs over the useful life of the expenditure
Many companies immediately charge the cost of immaterial items to expense.
Supplies
Page 17
Lightbulbs
The Concept of Materiality
Materiality is a matter of professional judgment
Adjusting Entry Recognizes revenue earned but not yet recorded, and Records receivable.
Page 8
Transaction Collect cash in settlement of receivable.
Page 10
The asset’s usefulness is partially consumed during the period.
Depreciatio n Expense (debit)
At end of period . . .
Accumulated Depreciation (credit)
– The size of the organization
– The cumulative effect of numerous immaterial events
– The nature of the item
Page 18
Effects of the adjusting entries
Page 19
Chapter 4 The Accounting Cycle
Accruals and Deferrals
Chapter Opener – Carnival Corporation
When did Carnival Corporation recognize their revenue?
Please indicate the accounting entries which should be made by Carnival Corporation upon receipt of the passengers‘ payments.
Page 16
The Concept of Materiality
An item is ―material‖ if knowledge of the item might reasonably influence the decisions of users of financial statements.
Adjusting Entry Recognizes portion earned as revenue, and Reduces balance of liability account.
Adjusting Entries and Timing Differences ——Accruing Unpaid Expenses
Page 7
Transaction Pay cash in settlement of liability.
Adjusting Entries and Timing Differences ——Accruing Uncollected Revenue
End of Current Period
Prior Periods Current Period Future Periods
– Like the trial balance, the adjusted trial balance shows that the total of the debit balance accounts is equal to the total of the credit balance accounts.