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1、A Look BackChapter 2 explained the analysis and recording of transactions. We showed how to apply and interpret company accounts, T-accounts, double-entry accounting, ledgers, postings, and trial balances.A Look at This ChapterThis chapter explains the timing of reports and the need to adjust accoun
2、ts. Adjusting accounts is important for recognizing revenues and expenses in the proper period. We describe the adjusted trial balance and how it is used to prepare financial statements.A Look AheadChapter 4 highlights the completion of the accounting cycle. We explain the important final steps in t
3、he accounting process. These include closing proce- dures, the post-closing trial balance, and reversing entries.Adjusting Accounts and Preparing Financial StatementsCAPLearning Objectives3CONCEPTUAL C1 Explain the importance of periodic reporting and the time period assumption. (p. 94) C2 Explain a
4、ccrual accounting and how it improves financial statements. (p. 95) C3 Identify the types of adjustments and their purpose. (p. 96)ANALYTICAL A1 Explain how accounting adjustments link to financial statements. (p. 105) A2 Compute profit margin and describe its use in analyzing company performance. (
5、p. 109)PROCEDURAL P1 Prepare and explain adjusting entries. (p. 97) P2 Explain and prepare an adjusted trial balance. (p. 106) P3 Prepare financial statements from an adjusted trial balance. (p. 106) P4 Appendix 3A Explain the alternatives in accounting for prepaids. (p. 113)LP3wiL10874_ch03_092-135
6、.indd Page 92 7/30/10 8:52:13 AM user-f500wiL10874_ch03_092-135.indd Page 92 7/30/10 8:52:13 AM user-f500/Users/user-f500/Desktop/Users/user-f500/DesktopSEATTLE“When we were starting this thing, people asked who was going to run it, and I said, I will, and my wife. And they said, You re crazy. And I
7、 said, Yes! ” Meet Ben Huh. His thing? Cheezburger Network (C which con- trols over 30 Websites devoted to Internet memes. (Memes are running gags, usually in JPEG or video format, which spawn and spread on the Web.) His sites include ICan HasCheezburger?, FailBlog, IHasAHotdog!, ROFLrazzi, and Tota
8、llyLooks Like. Since launching his company just a few years ago, his network has nearly 200 million page views per month and annual revenue in the millions. Revenue comes from display ads, along with some merchandise sales.Ben explains that he set up an accounting system early on to account for all
9、business activities, including cash, revenues, re- ceivables, and payables. He also had to learn about the deferral and accrual of revenues and expenses. Setting up a good ac- counting system is an important part of success, explains Ben. “I learned how to keep costs low. ”In spite of his quirky bus
10、iness, Ben insists “it is very serious business. ” He also seriously monitors the adjusting of accounts so that revenues and expenses are properly reported so that good decisions are made. Adds Ben, “No matter how strange or ridiculous a business looks, those fundamentals still need to be there. ”Fi
11、nancial statement preparation and analysis is a process that Ben emphasizes. Although he insists on timely and accurate ac- counting reports, Ben says “we re just having fun . . . we ve al- ways been very much counterculture. ” To achieve the fun part, Ben first took time to understand accounting ad
12、justments and their effects. It is part of the larger picture. We “make people happy for five minutes every day. ” But, for Ben to do that, he insists that a reliable accounting system is necessary . . . other- wise his business would fail.“We d like to continue to do what we do . . . build bigger c
13、om- munities and just kind of evangelize the idea that the user is great at creating excellent content, ” says Ben. “The market is far more efficient than any one company . . . but we haven t applied that theory to Web content. ”Sources: Cheezburger Website and BenHuh Website, January 2011; Entrepre
14、neur, August 2009; Wired, February 2010; The New York Times, April 2009; Time, August 2009Decision Insight“ Make sure that whatever commitment you make . . . you keep” BEN HUHHuh? Yes!wiL10874_ch03_092-135.indd Page 93 7/30/10 8:52:17 AM user-f500wiL10874_ch03_092-135.indd Page 93 7/30/10 8:52:17 AM
15、 user-f500/Users/user-f500/Desktop/Users/user-f500/DesktopChapter PreviewFinancial statements reflect revenues when earned and expenses when incurred. This is known as accrual accounting, which was the focus of Chapter 2. We showed how companies use account- ing systems to collect information about
16、external trans actions and events. We also explained how journals, ledgers, and other tools are useful in preparing financial statements. This chapter describes the accounting process for producing useful information involving internal transactions and events. An important part of this process is adjusting the account balances so that financial statements at the end of a reporting perio
