Chapter 3, Problem 3.1FSC

To determine

1)

Impact of adjusting entries on Financial Statements

Adjusting entries are passed in the books of accounts at the end of the year to record certain transactions that are required to be journalized in order to comply with applicable regulatory and legal framework.

Examples of adjusting entries are charging depreciation expenses on depreciable assets and amortization of intangible assets over their respective useful lives.

Asset accounts for which adjusting entries maybe recorded.

To determine

2)

Impact of adjusting entries on Financial Statements

Adjusting entries are passed in the books of accounts at the end of the year to record certain transactions that are required to be journalized in order to comply with applicable regulatory and legal framework.

Examples of adjusting entries are recording of expenses payable in the future periods, pertaining to current period.

Liability accounts for which adjusting entries maybe recorded.

To determine

3)

Recording of Assets at historical cost

In this practice assets are recorded at their historical purchase price throughout the lifetime of the asset.

All depreciation is posted to revenue accounts and instead of reducing the value of the asset, a separate account called accumulated depreciation is created and yearly depreciation is carried forward.

This depreciation is denoted as a deduction from the value of the asset in the financial statements.

How the depreciable assets are carried on the balance sheet, the method of calculation of depreciation and their useful lives.