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Chapter 4 Accounting

The document discusses key concepts in accrual-basis accounting including: - Recognizing revenue in the period it is earned and matching expenses to the revenue through adjusting entries. - The difference between accrual-basis and cash-basis accounting and how accrual conforms to GAAP by recording transactions before cash is received or paid. - Types of adjusting entries for deferrals like prepaid expenses which delay expense recognition, and accruals which delay revenue recognition like accrued revenues. - How the adjusted trial balance ensures the balance sheet and income statement report the correct amounts after all adjusting entries have been made.

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74 views8 pages

Chapter 4 Accounting

The document discusses key concepts in accrual-basis accounting including: - Recognizing revenue in the period it is earned and matching expenses to the revenue through adjusting entries. - The difference between accrual-basis and cash-basis accounting and how accrual conforms to GAAP by recording transactions before cash is received or paid. - Types of adjusting entries for deferrals like prepaid expenses which delay expense recognition, and accruals which delay revenue recognition like accrued revenues. - How the adjusted trial balance ensures the balance sheet and income statement report the correct amounts after all adjusting entries have been made.

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Chapter 4:

1/ timing issue:

 time period assumption: economic life of business can be divided into

artificial time period.

 Revenue recognition principle: revenue recognized in the accounting

period in which it is earned.

 Matching principle: let expense follow revenue.

 Revenue expense recognition: in accordance with generally accepted

accounting principle.

2/ Accrual vs cash-basis accounting:

 Accrual-basis accounting is in accordance with GAAP (tính luôn

những giao dịch chưa chuyển cash), while the cash-basis accounting

is not (chuyển cash r mới tính).

2/ Adjusting entries:

 Adjusting entries make it possible to report correct amounts on the

Balance sheet and income statement

 Be divided into 2 groups:

 Deferrals(tiền nhận dtrươc nhưng chưa được ghi nhận) :

prepaid expenses(asset), unearned reve (liabilities).

 Accruals(tiền nhận sau): accrued reve (asset), accrued

expenses(liability)
 Adjusting entries to record the expenses that apply to the current

accounting period, and to show unexpired costs in the asset accounts.

 Adjusting entries for prepaid expense: insurance, supplies,

advertising, rent, maintenance on equipment, fix assets

(despreciation)
 Depreciation is the process of allocating the cost of an asset to

expense over its useful life.

Note: chỉ có depreciation sẽ dùng accumulated deprecation on credit, còn

lại sẽ dùng prepaid expense.

- Accumulated depreciation đối nghịch với asset, tại n là khấu hao của

tsan.
- office equipment: book value của tài sản

- Net equipment:book value - depreciation.

Summary:

 Adjusting entries for “unearned revenues”: rent, airline tickets,

school tuition,...

Note: nhắc đến unearned reve là nhớ đến liability and reve account,

nhắc đến prepaid ex nhớ tới asset and expense account.

Summary:
 Adjusting entry result: in revenue recorded before cash receipt.

 Accrued reve: account receivable, rent, interest, services performed.


Note: accrued: trc khi làm điều chỉnh thì trống trơn=> ghi nhan them

Defferal nhan tien or chi tien r => lam giam n xuong

 Accrued expense: chi phí mua chịu


Special!!! general summary:

3/ The adjusted Trial Balance:

Sau tat ca ta dc adjusted trial balance~

Total debit = total credit ui => lam balance (asset and liabilities) cash-
>retained earning, retain earning statement (RE ->dividends), toi

income(revenue-> expense).

4/ closing books:

Permanent: co su chuyen giao so du cua ky nay sang ky khac

Temporary: ngược lại

Example of closing entries:

Summảy ò the accounting cycle:

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