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1、ADJUSTINGACCOUNTSANDPREPARINGFINANCIALSTATEMENTSChapter31234567891011121234Annually12MonthlyQuarterlySemiannuallyTheAccountingPeriodJanFebMarAprMayJunJulAugSepOctNovDecC1AccountingACCRUALBASISVS. CASHBASISAccrualBasisRevenuesarerecognizedwhenearnedandexpensesarerecognizedwhenincurred.CashBasisRev
2、enuesarerecognizedwhencashisreceivedandexpensesrecordedwhencashispaid.NotGAAPC2AccrualBasisvs.CashBasisOnthecashbasistheentire$2,400wouldberecognizedasinsuranceexpensein2009.Noinsuranceexpensefromthispolicywouldberecognizedin2010or2011,periodscoveredbythepolicy.C2AccrualBasisvs.CashBasisOntheaccr
3、ualbasis$100ofinsuranceexpenseisrecognizedin2009,$1,200in2010,and$1,100in2011.Theexpenseismatchedwiththeperiodsbenefitedbytheinsurancecoverage.C2Wehavedeliveredtheproducttoourcustomer,soIthinkweshouldrecordtherevenueearned.RecognizingRevenues&ExpensesRevenueRecognitionPrincipleC2RecognizingRevenu
4、es&ExpensesRevenueRecognitionPrincipleMatchingPrincipleSummaryofExpensesRentGasolineAdvertisingSalariesUtilitiesand....$1,0005002,0003,000450....Nowthatwehaverecognizedtherevenue,let’sseewhatexpensesweincurredtogeneratethatrevenue.C2Anadjustingentryisrecordedtobringanassetorliabilityaccountbalanc
5、etoitsproperamount.AdjustingAccountsPrepaid(Deferred)expenses*Unearned(Deferred)revenuesAccrued expenseAccrued revenuesFrameworkforAdjustments*includingdepreciationPaid(orreceived)cashbeforeexpense(orrevenue)recognizedPaid(orreceived)cashafterexpense(orrevenue)recognizedAdjustmentsC3Hereisthechec
6、kformy24-month insurancepolicy.Prepaid(Deferred)ExpensesResourcespaidforpriortoreceivingtheactualbenefits.AssetExpenseUnadjustedBalanceCreditAdjustmentDebitAdjustmentP1PrepaidInsuranceOn12/1/09,FastForwardpaid$2,400forinsurancefor2-years(24-months,December2009throughNovember2011).FastForwardrecor
7、dedtheexpenditureasPrepaidInsuranceon12/31/09.Whatadjustmentisrequired?637128P1SuppliesDuring2009,FastForwardpurchased$9,720ofsupplies.FastForwardrecordedtheexpendituresintheassetaccount,“Supplies.”OnDecember31,2009,ac
