In this chapter, you will take a deeper dive into the importance of making proper adjustments so that the financial statements truly reflect the current condition of the organization. You were briefly introduced to adjustments in the Professor Alldredge videos. One of the main principles of accounting is accurate and honest presentation of the financial condition of an organization and without the proper posting of adjustments and correcting entries, the financial statements will be incorrect. Pay close attention to the material presented.
You should read and take notes on Sections 4.1 through 4.10 of Chapter 4 on pages 144 through 173.
Section 4.1 provides chapter-specific learning objectives.
Section 4.2 provides another look at a potential employment opportunity for someone interested in the business of accounting.
Section 4.3 teaches the difference between cash- and accrual-based accounting. The foundational impact rests on the identification of revenues and expenses. There is a figure identified as Exhibit 14, ensure this information is properly detailed in your notes.
Section 4.4 described snapshots. Because the ultimate goal is to obtain useful information, it becomes necessary to take snapshots. What do we mean by a snapshot? Specifically, accounting is typically done within a specified period so that end users can assess the performance of a business entity. The identification of the terms accounting period, fiscal year, calendar year, adjusting entries, and the matching principle will be discussed in this area of the course as well. There will be distinction placed on the two classes and four types of adjusting entries. Ensure exhibit 16 from chapter 4 is properly identified in your notes.
Section 4.5 provides a more detailed understanding of the classes of adjusting entries as identified in the previous section of the course. A specific example is provided to assist with your analysis of this information.
Section 4.6 focuses on developing an understanding of how prepaid expenses and depreciation impact the accounting equation and the overall processing of these transactions.
Section 4.7 discusses adjustments. In a business there will be transactions that will have not been recorded by the end of a specified accounting cycle. These items can be identified as accrued assets or interest revenue, to name a couple. This section of the course seeks to help you identify and understand how to process these transactions. There is a great deal of visual support to assist in processing this information, so pace yourself accordingly.
Section 4.8 refers you to Exhibit 18 to guide your understanding of this information.
Section 4.9 will introduce you to the concept of trend percentages and provide you with a formula to use when calculating trend percentages.
Section 4.10 reinforces the concepts learned in this unit of the course. The solutions to the self-test are located on pages 188 and 189.