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Chapter 4-The accounting cycle
General outline
In this chapter we have to explain the 4th step in the accounting cycle: Adjusting entries.
The first three steps that were discussed before were:
1. recording transactions
2. posting transactions
3. Preparing a trial balance (need to explain the purpose of the trial balance).
Need to explain the following:
? What do we mean by adjusting entries & what is their purpose: some business activities affect the revenue and expenses of multiple accounting periods. Therefore adjusting entries are needed at the end of each accounting period to make certain that appropriate amounts of revenue and expenses are reported in the company's income statement.
? What are the types of adjusting entries:
1. converting assets to expenses
a. Go to page 145 & show students Overnight unadjusted trial balance.Explain to them why it is unadjusted.
b. Give examples on prepaid expenses, shop supplies, insurance policies. P 146-147
c. Explain the concept of depreciation and accumulated depreciation-P148-150
&nbs ...