ACCT 200 1st Edition Lecture 5 Outline of Last Lecture II. Timing IssuesIII. The Basics of Adjusting EntriesOutline of Current Lecture II. The Basics of Adjusting Entries ContinuedIII. The Adjusted Trial Balance and Financial StatementsIV. Closing the BooksCurrent LectureAdjusting Entries for AccrualsAction 1st Cash 2nd Made to record:- Revenue earned OR- Expense incurredIn the current accounting period that have not been recognized through daily entriesAdjusting Entries for “Accrued Revenues”Revenues for services performed but not yet received in cash or recordedAdjusting entry results in:- Revenue recorded before cash receiptAccrued revenues often occur in regards to:- Rent- Interest- Services performedAn adjusting entry serves two purposes- Establishes accounts receivable = expecting moneyThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.- Record revenue = work is done, earned, performed, and/or completedAdjusting entries for accrued revenues- A/R : asset : increase in debit- Rev : Rev : increase in equity : creditExpenses incurred but not yet paid in cash or recordedAdjusting entries may result in:- Expense recorded (action 1st) before cash payment (later)Accrued expenses often occur in regard to- Bills not yet paid- Interest- Taxes- SalariesAn Adjusting entry serves two purposes:- Record liability: we owe, obligation- Recognize increases expense: what was incurredExpenses increase: equity decrease: debit (expense)Liability increase: credit (payable)The Adjusted Trial Balance - After all adjusting entries are journalized and posted the company prepares another trialbalance from the ledger accounts adjusted trial balance (ATB)- The Adjusted trial balance’s purpose is to prove that debits = credits after adjustments- The adjusted trial balance is the primary basis for the preparation of the financial statementsPreparing Financial StatementsFinancial statements are prepared directly from the ATB- Income statement- Retained earning statement- Balance sheetClosing the BooksAt the end of the accounting period after financial statements are issued, companies transfer the temporary account balances to the permanent stockholder’s equity account- retained earnings- Temporary accountso Revenue, expenses, dividends (start when 0 at a new period)- Permanent Accountso Assetso Liabilityo Stockholders equityThe purpose of the post-closing trial balance is to prove the equality of the permanent account balances that the company carries forward into the next accounting