1. Adjustments!!! & Corrections

2. Things to know Time period assumption Revenue recognition principle Matching principle Revenue and expense recognition (Rule set by GAAP or IFRS) Also accrual basis of accounting not cash

3. Example

4. Why adjusting entries? Trial balance may not be complete Things sometime fall through the cracks Mistakes are part of life Some costs need to be expensed over time

5. Two types of adjusting entries

6. Then there is Depreciation What is Depreciation? How to account for it? Accumulated Depreciation – What is it? – Its “a contra” asset

7. Also need to look for Interest How to calculate interest? FV x Interest Rate x time period What is the journal?

8. Example

9. Corrections When do we need it – When we made a “mistake” of course Can we go back and correct the mistake and be done with it? How should we correct it?

10. Example Insurance expired $100 Our journal – Insurance expense Debit 100 – CashCredit 100 – What is wrong with it? – What do we do?

11. Some other examples