Week Two Discussion Questions Essay Example | Topics and Well Written Essays - 500 words - 1

Week Two Discussion Questions - Essay utilizationFor example, the items in the companys rest period sheet can be explained by the items in its income parameter. On the other hand, the changes in the companys retained earnings reports are generated both from the income statement and balance sheet. Lastly, the cash in the current assets section of the balance is further explained by the more(prenominal) extensive statement of cash flow.Companies using accrual accounting need to prepare adjusting entries for postpaid items. These adjusting entries give a more adequate picture of the companys assets by subtracting the amount in the prepaid write down which is already consumed. For example, company A purchases prepaid insurance at the amount of $1200 during Jan 1 which is consumable for one course which it records as a debit in prepaid expense. At each end of the month, adjusting entries which include crediting prepaid expense by $100 should be undertaken in order to reflect the tr ue amount of prepaid insurance in its portfolio.An example of adjusting entries for accruals is the case of employees salary which companies incur each day of the month exclusively is paid at the first day of the following month. At the end of the month, the company debits salary expense and credits salary payable of the amount. However, during the first of the month adjusting entry is made to indicate that this salary is promptly paid. This is done by debiting salary payable and crediting cash.Closing entries are necessary in order to regularise temporary accounts in their final destinations. It should be noted that revenue, expenses, and capital withdrawal accounts are temporary and should be zero at each start of accounting period. Thus, the following closing entries are made pixilated revenue accounts to income summary fill up the expense accounts to income summary close income summary to retained earnings and close dividends or capital drawings to