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Reviewer For Fundamentals of Abm 2 Adjusting Entries

This document provides an overview of adjusting entries, balance sheet elements, and financial statements. It defines adjusting entries as entries made at the end of an accounting period to update asset, liability, revenue, and expense account balances before financial statements are prepared. The key types of adjusting entries are also listed. Current and noncurrent assets and liabilities are defined based on whether they will be realized or settled within one year or the normal operating cycle. The elements of the balance sheet - assets, liabilities, and equity - are also defined. Finally, the objectives and components of basic financial statements are briefly outlined.

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Psalm Ruvi Tala
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127 views1 page

Reviewer For Fundamentals of Abm 2 Adjusting Entries

This document provides an overview of adjusting entries, balance sheet elements, and financial statements. It defines adjusting entries as entries made at the end of an accounting period to update asset, liability, revenue, and expense account balances before financial statements are prepared. The key types of adjusting entries are also listed. Current and noncurrent assets and liabilities are defined based on whether they will be realized or settled within one year or the normal operating cycle. The elements of the balance sheet - assets, liabilities, and equity - are also defined. Finally, the objectives and components of basic financial statements are briefly outlined.

Uploaded by

Psalm Ruvi Tala
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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FIRST SEM, FIRST QUARTER – UNIT ASSESSMENT

REVIEWER FOR FUNDAMENTALS OF ABM 2


ADJUSTING ENTRIES - result of past events
- future economic benefits are expected to
- entries made at the end of the accounting flow to the entity
period before closing procedures to update
balances of asset, liability, revenue and CURRENT ASSETS – expects to realize the
expense accounts to make their balances asset or intends to sell or consume it on its normal
ready for their preparation of financial operating cycle
position.
- primarily for the purpose of trading
- expects to realize the asset within twelve
KINDS OF ADJUSTING ENTRIES months after reporting period
- cash or cash equivalent unless the asset is
1.) Prepaid Expenses – starts as an asset, restricted from being exchanged or used to
ends as an expense settle liability for at least twelve months after
2.) Deferred Revenue – liability – revenue reporting period
3.) Accrued Revenue – earned revenue but no
payment example:
4.) Accrued Expense – expenses were
incurred but with no payment cash prepaid expenses
5.) Asset Depreciation – systematic way of accounts receivables office supplies
allocating the value of an asset decline
NONCURRENT ASSETS – all other assets
ADJUSTING ENTRIES ADHERE TO: that is not current
- completeness example:
- freedom from error
- timeliness land land improvements
- accrual basis of accounting machineries equipments
- revenue recognition
- matching principle ♥ LIABILITIES – present obligation of the
entity from past events
- settlement is expected to result in outflow
DEPRECIATION – decline in value of an asset from the entity of resources
due to wear and tear, obsolescence and
passage of time CURRENT LIABILITIES – expects
to settle the liability on its normal operating
RESIDUAL VALUE – the value expected in the cycle
asset after its useful life - holds liability primarily for the purpose of
trading
STRAIGHT LINE DEPRECIATION - due to be settled within twelve months after
the reporting period
asset cost – residual value / life in years - does not have an unconditional right to
defer settlement for at least 12 months after
= annual depreciation
the reporting perios

example
STATEMENT OF FINANCIAL POSITION trade accounts payable short term payable
salaries payable income tax
FINANCIAL STATEMENTS – structured payable
representation of the financial position and
financial performance of an entity NONCURRENT LIABILITIES – all
liabilities that is not current
- the objective of financial statements is to
provide information about the financial example
position, financial performance and cash bonds payable
flow of an entity long-term notes payable
- useful to a wide range of users in making
sound decision EQUITY – residual interest in the assets of
the entity after deducting all its liabilities
Financial statements provide info about
entity’s:

a. assets ASSETS = LIABILITIES


b. liabilities +
c. equity CAPITAL
d. income and expenses
e. contributions by and to owners in their CURRENT CURRENT LIABILITIES
company as owners ASSETS NONCURENT LIABILITIES
f. cash flows = +
NONCURRENT EQUITY
BALANCE SHEET ELEMENTS ASSETS

♥ ASSETS – resource
- result of past events
PSALM TALA
12- ABM WEDGWOOD
SCC – SHS 2021-2022

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