COMM 457 Lecture Notes - Lecture 7: Earnings Before Interest And Taxes, Retained Earnings
Document Summary
Depreciation expenses: non-cash item, allocation of the cost of an asset to period in which revenue is recognized. They can play with the estimated useful life or the residual value in order to show an asset can last for a long time (not ethical, it happens when they"re under pressure to achieve good results) You do have to change the estimate for that period, but never ever go back to the previous periods. However, if it was because of an error (not new information) you do have to go back and change everything. Adjustments made, accounts complete and accurate: statement of operations (net income, net earnings, statement of retained earnings, statement of financial position, statement of cash flows. Only the first three are on the midterm not the statement of cash flows. Closing process: only occurs at year end, permanent accounts, are ones whose balance remains the same, assets.
