Adjusting entries : Adjusting entries refers to the entries that are made at the end of an accounting period in accordance with revenue recognition principle, and expenses recognition principle. All adjusting entries affect at least one income statement account (revenue or expense), and one balance sheet account (asset or liability). Rules of Debit and Credit: Following rules are followed for debiting and crediting different accounts while they occur in business transactions: Ø Debit , all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities . Ø Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses. Accrual basis of accounting: Accrual basis of accounting refers to recognizing the financial transactions during the period in which the event occurs, even if the cash is not exchanged. Income statement: This is the financial statement of a company which shows all the revenues earned and expenses incurred by the company over a period of time. Balance sheet: This is the financial statement of a company which shows the grouping of similar assets and liabilities under subheadings. To prepare: The adjusting entries in the books of Company AC at the end of the year.
Adjusting entries : Adjusting entries refers to the entries that are made at the end of an accounting period in accordance with revenue recognition principle, and expenses recognition principle. All adjusting entries affect at least one income statement account (revenue or expense), and one balance sheet account (asset or liability). Rules of Debit and Credit: Following rules are followed for debiting and crediting different accounts while they occur in business transactions: Ø Debit , all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities . Ø Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses. Accrual basis of accounting: Accrual basis of accounting refers to recognizing the financial transactions during the period in which the event occurs, even if the cash is not exchanged. Income statement: This is the financial statement of a company which shows all the revenues earned and expenses incurred by the company over a period of time. Balance sheet: This is the financial statement of a company which shows the grouping of similar assets and liabilities under subheadings. To prepare: The adjusting entries in the books of Company AC at the end of the year.
Solution Summary: The author explains the rules of debiting and crediting different accounts while they occur in business transactions.
Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.
Chapter 3, Problem 3.2APR
(a)
To determine
Adjusting entries:
Adjusting entries refers to the entries that are made at the end of an accounting period in accordance with revenue recognition principle, and expenses recognition principle. All adjusting entries affect at least one income statement account (revenue or expense), and one balance sheet account (asset or liability).
Rules of Debit and Credit:
Following rules are followed for debiting and crediting different accounts while they occur in business transactions:
Ø Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.
Ø Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.
Accrual basis of accounting:
Accrual basis of accounting refers to recognizing the financial transactions during the period in which the event occurs, even if the cash is not exchanged.
Income statement:
This is the financial statement of a company which shows all the revenues earned and expenses incurred by the company over a period of time.
Balance sheet:
This is the financial statement of a company which shows the grouping of similar assets and liabilities under subheadings.
To prepare: The adjusting entries in the books of Company AC at the end of the year.
(b)
To determine
The effects on the income statement, if adjusting entries are not recorded.
(c)
To determine
The effects on the balance sheet, if adjusting entries are not recorded.
(d)
To determine
The effects on the “net increase or decrease in cash” on the statement of cash flow, if adjusting entries are not recorded.
Financing Deficit
Stevens Textile Corporation's 2019 financial statements are shown below: Just need the correct LOC?
Balance Sheet as of December 31, 2019 (Thousands of Dollars)
Cash
$ 1,080
Accounts payable
$ 4,320
Receivables
6,480
Accruals
2,880
Inventories
9,000
Line of credit
0
Total current assets
$16,560
Notes payable
2,100
Net fixed assets
12,600
Total current liabilities
$ 9,300
Mortgage bonds
3,500
Common stock
3,500
Retained earnings
12,860
Total assets
$29,160
Total liabilities and equity
$29,160
Income Statement for December 31, 2019 (Thousands of Dollars)
Sales
$36,000
Operating costs
34,000
Earnings before interest and taxes
$ 2,000
Interest
160
Pre-tax earnings
$ 1,840
Taxes (25%)
460
Net income
$ 1,380
Dividends (40%)
$ 552
Addition to retained earnings
$ 828
Stevens grew rapidly in 2019 and financed the growth with notes payable and long-term bonds. Stevens expects sales to…
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Chapter 3 Solutions
Bundle: Accounting, 27th + Working Papers, Chapters 1-17