Overview
You have read that companies record business transactions using the double-entry bookkeeping method (debits and credits). In keeping with the matching principle, companies must report revenues in the period that they are earned and expenses in the period that they are incurred. To achieve this objective, accountants prepare adjusting entries at the end of each accounting period to ensure that (a) all revenues and expenses are reported in the correct period, and (b) all assets and liabilities are properly stated at the end of the period. Adjusting entries typically fall into the following four categories: Deferred expenses (converting assets to expenses) Deferred revenue (converting liabilities to revenue) Accrued expenses Accrued revenue The videos for this reflection paper (linked in the Study Materials) will enhance your understanding of the four adjusting entry types. Write a 2- to 2½-page reflection paper that responds to the following prompt. Consult the Course Calendar for due dates. Select two of these entry types to explore in some depth. In your reflection paper, address the following for each entry type: Describe the purpose of the adjusting entry and a scenario in which a company might need to make this type of entry. Explain how the entry should be recorded. Discuss the financial statement impact of omitting the adjusting entry. [MO 2.2, MO 2.3, MO 2.4]