ACCTNG 2400 1st Edition Lecture 13 Outline of Last Lecture I. Chapter 4!a. Accounting Cycleb. Closing processi. Temporary accountsc. Why adjustments are neededd. Depreciatione. Types of adjustmentsi. Deferralii. AccrualOutline of Current Lecture I. Adjustments for DepreciationII. Contra-accountsIII. Deferral and accrual adjustmentsCurrent LectureAdjustments for depreciation- Depreciation is the process of allocating the cost of buildings, vehicles and equipment to the accounting periods in which they are used- It is NOT an estimate of the market value of the asset- Represents the allocation of the use of an asset over time- We use the straight-line method, where the same amount is recognized in each period of the asset’s expected useful life (distribute evenly each month)Contra-AccountsThese 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.- An account that is an offset to, or reduction of, a related account- A contra-account is always paired with a related account, and always has a balance opposite (debit/credit) its paired account- Contra-asset is the most common, but there are contra-liability accounts (like bond discounts) and contra-equity accounts (like treasury stock)Deferral and Accrual adjustments- Deferral adjustments record the use of an asset as an expense- Accrual adjustments increase either an asset or a liabilityNote: Cash is an account that NEVER has adjusting entries. No adjusting cash
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