| Adjusting Accounts and Preparing Financial Statements
After you have read this chapter you should be able to: |
Conceptual objectives: - Explain the importance of periodic reporting and the time period assumption.
- Explain accrual accounting and how it improves financial statements.
- Identify steps in the accounting cycle.
- Explain and prepare a classified balance sheet.
Analytical objectives: - Explain how accounting adjustments link to financial statements.
- Compute profit margin and describe its use in analyzing company performance.
- Compute the current ratio and describe what it reveals about a company’s financial condition.
Procedural objectives: - Prepare and explain adjusting entries.
- Explain and prepare an adjusted trial balance.
- Prepare financial statements from an adjusted trial balance.
- Describe and prepare closing entries.
- Explain and prepare a post-closing trial balance.
- Appendix 3A—Explain the alternatives in accounting for prepaids.
- Appendix 3B—Prepare a work sheet and explain its usefulness.
- Appendix 3C—Prepare reversing entries and explain their purpose.
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