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Financial Statement Analysis

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Financial Statement Analysis-FIN621
VU
Lesson-29
SUMMARY
(Previous Lectures)
Example
·
Which of the following are based upon the realization principle and the matching principle
(indicate all correct answers).
­  Adjusting Entries (Matching Principle)
­  Closing Entries (Matching Principle)
­  Accrual Basis of Accounting
­  Measurement of Net Income under GAAP (Matching Principle)
Example
·
Which of the following explains the debit and credit rules relating to recording of Revenues and
Expenses:
­  Expenses appear on the left side of the balance sheet and are recorded by debits.
Revenues appear on the right side of the balance sheet and are recorded by credits. (X)
­  Expenses appear on the left side of the income statement and are recorded by debits.
Revenues appear on the right side of the income statement and are recorded by credits.
(X)
­  The effect of revenues and expenses in the owner's equity. (Tick Correct)
­  Realization and Matching Principle. (X)
Example
·
The entry to recognize Depreciation expenses (indicate all correct answers):
­  Is an application of Matching Principle? (Correct)
­  Is a closing entry. (X)
­  Usually includes an offsetting credit either to cash or to Accounts payable. (X)
­  Is an adjusting entry. (Correct)
Example
·
Indicate all correct answers:
­  In the accounting cycle, closing entries are made before adjusting entries. (X)
­  Financial Statements may be prepare as soon as adjusted trial balance is completed.
(Correct)
­  The owner's equity is not up to date until the closing entries have been posted. (Correct)
­  Adjusting entries are prepared before financial statements are prepared. (Correct)
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