Adjusting the accounts

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Adjusting the accounts by Mind Map: Adjusting the accounts

1. Accural basis accounting

1.1. Companies recognize revenue when they performed a srevice

1.2. Expenses are recognized when incureed

2. Cash basis accounting

2.1. Revenue recognised when cash is received

2.2. Expenses recognised when cash is paid

3. Deferrals

3.1. Prepaid expenses

3.1.1. Insurance /rent /equipments

3.2. Un earned revenue

3.2.1. Air line ticketes / rent / customer deposits

4. Accrulas

4.1. Accrued revenues

4.1.1. Rent _ interest_services

4.2. Accrued expenses

4.2.1. Taxes_ salaries

5. Adjusted trial balance

5.1. Prepareed after all adjusting entries are journalized and posted

5.2. Purpose is to prove the equality of debit balance and credit balance

5.3. Is the primary basis for preparation of financial statement

6. Financial statement

6.1. Income statement

6.2. Owner’s equity statement

6.3. Balance sheet

7. Enhancing qualities

7.1. Comparability

7.2. Verifiable

7.3. Understandability

7.4. Consistency

7.5. Timely

8. Principles of financial reporting

8.1. Revenue recognition principle

8.2. Expenses recognition principle

8.3. Full disclosure principles