BU127 Chapter Notes - Chapter 4: Money Market Account, Deferred Income, General Ledger
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BU127 Full Course Notes
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Document Summary
Chapter 4: adjustments, financial statements, and the quality of earnings. Management bears the ultimate responsibility for the preparation of nancial statements. High quality nancial statements are those that are considered relevant and reliable to the user (investors and creditors) During the accounting period, external transactions between the business and other external parties are recorded as they occur. At the end of the accounting period, the account balances are analyzed and adjusting journal entries are recorded for internal transactions that have direct and measurable effect on the accounting entity, particularly for revenue and expense recognition. Adjustments are done so that account balances re ect the proper amounts in the correct period. Users expect revenues and expenses to be reported in the proper period, based on the revenue principle and matching process. Revenues must be recorded when earned, and expenses must be recorded when incurred, regardless of when cash is received or paid.
