AFM101 Chapter Notes - Chapter 4: Deferred Income, Deferral, Accounts Receivable

• School: University of Waterloo
• Department: Accounting & Financial Management
• Course: AFM101
• Professor: Duane Kennedy

Document Summary

The accounting cycle is the process used by firm to analyse and record transactions, adjust entries, prepare financial statements for investors, and prepare records for the next period. In this chapter, we focus on end-of-period adjusting of entries in order to record revenues and expenses in the proper period. Although accounting systems are designed to record most transactions daily dealing with cash, this is most effective when the service and the payment for the service occurs within the same fiscal period. However , cash in not always received in the same period in which the company earns revenue, Likewise the cash is not always paid in the same period in which the company incurs an expense. Companies wait until the end of the period to adjust their entries because adjusting them on a daily basis would be very time consuming and costly. advance) and accrued (money paid/received after service is received or performed)