Lecture 03 - Reporting Process B

Question 1

Four Types of Adjustments

Answer 1

Der Unterschied besteht darin, dass

“deferred”
die Erfassung verzögert, während

“accrued”
die Erfassung basierend auf dem Entstehungszeitpunkt ermöglicht.

Question 2

Preparing Financial Statements (4)

Answer 2

Question 3

Closing Process: Retained earnings

Answer 3

The “closing process” refers to the final steps taken to complete a financial period, such as a month or a year. This often involves finalizing financial statements, reconciling accounts, and preparing for the next period.

Retained earnings
is a permanent account reported on the balance sheet.

Question 4

Definition: Event if the unadjusted trial balance shows an
equal amount of debits and credits,
this does not mean that the general ledger is correct.

• Reasons (4)
• Conclusion

Answer 4

Journal entries could have been

• wrong accounts
• wrong amounts
• omitted (weggelassen)
• falsified (gefälscht)

Thus, the equality of debits and credits is a necessary, but not a sufficient condition for the financial statement to be correct.

Question 4

Adjusting Entries in Accounting (3)

Answer 4

The process that ensures ..

• revenues and expenses are accurately recorded in the period in which they are
• earned or incurred, aligning with the matching principle and accrual accounting.

Question 5

Contra Accounts (2)

Answer 5

Used in financial statements to provide additional information,

such as Accumulated Depreciation, a contra asset in the balance sheet, which helps estimate asset age.

Question 6

Contra Asset Account Increase

Answer 6

An increase in the contra asset account, such as accumulated depreciation,
reduces the book value of the asset.

Question 7

Financial Statement Preparation (2)

Answer 7

Financial statements are typically prepared for annual and quarterly accounting periods.

However, situations like a bank loan request can lead to financial statement preparation for non-accounting periods.

Question 8

Adjusting Entries & Accounting Period Concept (2)

Answer 8

Accounting period concept
preparation of financial statements for specific time periods.

• Income Statement,
• Statement of Stockholders’ Equity,
• Statement of Cash Flow

Adjusting entries
used to ensure that these statements accurately reflect the company’s financial position and performance during those periods.

Question 9

How is the order of accounts for an unadjusted trial balance typically organized? (5)

Answer 9

By listing the accounts (account: debit ; credit) in specific sequence or structure.

1. Asset
2. Liability
3. Equity
4. Revenue
5. Expence