Chapter 3 - Adjusting accounts for financial statements. The learning objectives for this chapter include: Explain the importance of periodic reporting and the time period assumption, explain accrual accounting and how it improves financial statements, identify steps in the accounting cycle, explain and prepare a classified balance sheet. | Financial Accounting John J. Wild Seventh Edition Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Chapter 3 Adjusting Accounts for Financial Statements Adjustments An adjusting entry is recorded to bring an asset or liability account balance to its proper amount as well as update any related revenue or expense account. Adjusting Accounts Paid (or received) cash before expense (or revenue) recognized Paid (or received) cash after expense (or revenue) recognized Prepaid (Deferred) expenses* Unearned (Deferred) revenues Accrued expenses Accrued revenues Framework for Adjustments *including depreciation C2, P1 3- Links to Financial Statements A1 3- The adjusted trial balance combines the unadjusted trial balance account balances with the adjustments we make. FastForward – Computing the Adjusted Trial Balance - December 31, 2013 P2 3- Prepare Income Statement P3 3- Prepare Statement of Retained Earnings Note that net income from the Income Statement carries to the Statement of Retained Earnings. P3 3- Prepare Balance Sheet P3 3- Recording Closing Entries Close revenue accounts. Close expense accounts. Close income summary account. Close dividends account. P4 3- The Accounting Cycle Start 1. Analyze transactions 2. Journalize 3. Post 4. Prepare unadjusted trial balance 5. Adjust 6. Prepare adjusted trial balance 7. Prepare statements 8. Close 9. Prepare post-closing trial balance C3 10. Reverse (optional) 3- End of Chapter 3 3- | Financial Accounting John J. Wild Seventh Edition Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Chapter 3 Adjusting Accounts for Financial Statements Adjustments An adjusting entry is recorded to bring an asset or liability account balance to its proper amount as well as update any related revenue or expense account. Adjusting Accounts Paid (or received) cash before expense (or revenue) recognized Paid (or received) cash after expense (or revenue) recognized Prepaid (Deferred) expenses* Unearned (Deferred) revenues Accrued expenses Accrued revenues Framework for Adjustments *including depreciation C2, P1 3- Links to Financial Statements A1 3- The adjusted trial balance combines the unadjusted trial balance account balances with the adjustments we make. FastForward – Computing the Adjusted Trial Balance - December 31, 2013 P2 3- Prepare Income Statement P3 3- Prepare Statement of Retained Earnings Note that net income from the Income Statement carries to the Statement of Retained Earnings. P3 3- Prepare Balance Sheet P3 3- Recording Closing Entries Close revenue accounts. Close expense accounts. Close income summary account. Close dividends account. P4 3- The Accounting Cycle Start 1. Analyze transactions 2. Journalize 3. Post 4. Prepare unadjusted trial balance 5. Adjust 6. Prepare adjusted trial balance 7. Prepare statements 8. Close 9. Prepare post-closing trial balance C3 10. Reverse (optional) 3- End of Chapter 3 3- .
