Chapter 4: Question

Adjusting entries are made at the end of the accounting period to record all revenues and expenses that have not been recorded but belong in the current period. They update the balance sheet and income statement accounts at the end of the accounting period.

Deferred Revenues; Accrued Revenues; Deferred Expenses; Accrued Expenses.

An account related to an asset that is an offset or reduction to the assets balance. Accumulated Depreciation is a counra-account to the equipment and buildings accounts

The net income on the income statement is included in determining ending retained earnings on the statement of stockholders' equity and the balance sheet. The change in the cash account on the balance sheet is analyzed and categorized on the statement of cash flows into cash from operating, investing and financing activities.

Revenue-Expenses=Net Income

Assets= Liabilities + Stockholders' Equity

Ending Stockholders' Equity = (Beginning Contributed Capital + Stock Issuance - Stock Repurchases)+ (Beginning Retained Earnings + Net Income - Dividends Declared)

Adjusting Entries have no effect on cash. For Deferred Revenue and Expense, cash was received or paid at some point in the past; Accruals, cash will be received or paid in a future accounting period. At the time of adjusting entry, there is no cash being received or paid.

Earning per share= Net Income / average number of share of stock outstanding during the period.

Total asset turnover ratio = Sales/Operating Revenues/ Average Total Assets

Closing entry is made at the end of the accounting period to...transfer the balance to an income statement to retain earnings...reduce the rev., gain, expense, and loss accounts to a zero balance sheet so that they can be used for accumulation process during the next period. *(A closing entry must be entered into the system through the journal and posted to the ledger accounts to state properly the temporary and permanent account balances)*

Balance Sheet Accounts; that is, the assets, liability and stockholders' equity (these are not closed at the end of each period)

Income Statement Accounts; that is, revenue, gains, expenses, and losses (these are closed at the end of each period)

Another name for permanent accounts

Another name for temporary accounts

Post-Closing trial balance is a listing taken from the ledger after the adjusting and closing entries have been journalized and posted. Is not a necessary part of the accounting info. process cycle but it is useful b/c it demonstrate the equality of debits and credits in the ledger after the closing entry has been journalized and posted and that all temporary accounts have zero balances.