ACCT 2101 Lecture Notes - Lecture 3: Accrual, Deferral, Trial Balance

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Chapter 3: adjusting accounts and preparing financial statements. Account cycle: start analyze transactions journalize post prepare unadjusted trial balance. Adjust prepare adjusted trial balance prepare statements close prepare post-closing trial balance. Accounting periods: annually (one a year), semiannually (twice a year) quarterly (4 times a year) Accrual basis = revenues are recognized when earned and expenses are recognized when incurred (once the services are complete/ the % completed) Cash basis = revenues are recognized when cash is received and expenses recorded when cash is paid. (not consistent with gaap) Accrual basis (revenues): record revenues in the accounting period when earned. Revenues earned when products are delivered or services are performed. (when service is not provided, it becomes a liability [unearned revenue]) Accrual basis (expenses): matching principle: expense recognition: record expenses that were incurred (incurred: become subject to as a result of one"s own behavior or action), to generate the revenues recorded in the accounting period.

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