ACG 2021 Chapter Notes - Chapter 3: Deferral, Accrual, Revenue Recognition
Document Summary
Nature of the adjusting process: accounting period concept- requires that revenues and expenses be reported in the proper period, accrual basis of accounting- revenues are reported on the income statement in the period in which they are earned. Types of accounts requiring adjustment: prepaid expenses- the advance payment of future expenses recorded as assets when cash is paid; become expenses over tie or during normal operations. Supplies: some supplies are used during the month, but some are still on hand (not used) Chapter 3: the adjusting process: at the end of the month, the supplies expense account is debited the amount used and the supplies account is credited the same amount. Prepaid insurance: prepaid insurance is paid for 12 months in advance, at the end of each month, the insurance expense account is debited, and the prepaid insurance account is credited by the amount for one month, ex.
