Adjusting Entries for Accruals

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University of Toronto Scarborough
Financial Accounting
Liang Chen

Adjusting Entries for Accruals The adjusting entry for accruals will increase both a balance sheet and an income statement account Accrued Revenues Revenues earned, but not yet received in cash or recorded at the statement date, are accrued revenues. An adjusting entry is required for two purposes : to show the receivable that exists at the balance sheet date, and to record the revenue that has been earned during the period The adjusting entry results in a debit (increase) to an asset account and a credit (increase) to a revenue account Accrued Expenses Expenses incurred but not yet paid or recorded at the statement date are called accrued expenses (i.e. interest, rent, taxes) The adjusting entry for accrued expenses results in a debit (increase) to an expense account and a credit (increase) to a liability account Adjusting Entries for Estimates Amortization According to the matching principle, a portion of the cost of a capital
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