ECON 4 Lecture 6: Jan 24 2019
Document Summary
This is the end of the period. Account balances are summed on a worksheet to verify that debits equal credits. Update existing account balances to reflect current values. Eg: unearned rental revenue, unearned revenue on a long term service contract, deferred subscription revenue. Journal entry : dr. unearned revenue liability. Update existing account balance to reflect current accounting values. Eg: prepaid rent, prepaid insurance, software license, legal counsel, depreciation or amortization. Book the revenue now for some future expected cash inflow. You deliver a good or service but haven"t gotten paid yet. Create a new account balance to reflect unrecorded assets or liabilities. Book the expense now for future expected cash outflow. Eg: income taxes salaries/wages payable payable, interest payable, Before we can construct the income statement, we must make sure we"ve fully accounted for any expenses or revenues that have been incurred or accrued during the remaining operating window. There are never any cash transactions in adjusting entries.
