Lesson 6 - Adjustments
Learning Goals: By the end of this lesson you will be able to
- Describe the nature and purpose of an adjusted trial balance, and prepare one.
- Prepare adjusting journal entries for the alternative treatment of prepayments.
It occurs once in a minute, twice in a moment, but never in an hour.
Make a review of previous lesson
A contra asset account is offset against a related account on the balance sheet or income statement. A contra asset account has an opposite balance (credit) as compared to its related asset account (debit).
Prepaid expenses are costs paid in cash and recorded as assets before they are used or consumed.
Depreciation is the process of allocating the cost of a long-lived asset to expense over its expected useful life in a rational and systematic manner.
The carrying amount of an asset is calculated by subtracting the accumulated depreciation from the cost of the asset
Unearned revenues are revenues received in cash and recorded as liabilities before they are earned