RSM219H1 Lecture Notes - Lecture 4: Coastline Community College, Basis Of Accounting, Deferral

• School: UTSG
• Department: Rotman Commerce
• Course: RSM219H1
• Professor: Alexander Edwards

Document Summary

I accrual-basis accounting (required by gaap) recognizes transactions in the periods in which the events occurred. Recorded to ensure that all revenues earned are recorded. Recorded to ensure that all expenses incurred are recorded. Final closing of the accrual accounting cycle: step 1 transfer adjusted trial balance account balances to the. Financial statements: step 2 close out all temporary accounts to retained earnings, step 3 prepare a final post-close trial balance. Closing entries transfer net income (or net loss) and dividend account balances to retained earnings so that the next fiscal period starts with zero balances for that operating cycle. Net income is a function of revenues expenses and both accounts, along with dividends, are considered temporary accounts because they relate to only one operating cycle. In contrast, all accounts on the balance sheet exist reporting period over reporting period and therefore are classified as permanent.