Objects of using accounting information include: Managers, Owners, Employees,

External Users of Accounting, Investors, Lenders, Suppliers.

statement of owner’s equity

financial statement showing how the equity of the organization changed for a period
of time.
balance sheet
financial statement that lists what the organization owns (assets), owes (liabilities),
and is worth (equity) on a specific date.
income statement
financial statement that measures the organization’s financial performance for a given
period of time.

Types of Adjusting Entries

Accrued Income – income earned but not yet received
Accrued Expense – expenses incurred but not yet paid
Deferred Income – income received but not yet earned
Prepaid Expense – expenses paid but not yet incurred
Adjusting entries are also made for:
Depreciation
Doubtful Accounts or Bad Debts, and other allowances

Temporary accounts are company accounts whose balances are not carried over from

one accounting period to another, but are closed, or transferred, to a permanent
account. ... Permanent accounts are found on the balance sheet and are categorized as
asset, liability, and owner's equity accounts.

The purpose of the closing entry is to reset the temporary account balances to zero on
the general ledger, the record-keeping system for a company's financial data.
Temporary accounts are used to record accounting activity during a specific period.
Recording a Closing Entry
There is an established sequence of journal entries that encompass the entire closing
procedure:
First, all revenue accounts are transferred to income summary. This is done through a
journal entry debiting all revenue accounts and crediting income summary.
Next, the same process is performed for expenses. All expenses are closed out by
crediting the expense accounts and debiting income summary.
Third, the income summary account is closed and credited to retained earnings.
Finally, if a dividend was paid out, the balance is transferred from the dividends
account to retained earnings.

Beginning inventory plus the net cost of purchases is the merchandise available for
sale. As inventory is sold, its cost is recorded in cost of goods sold on the income
statement. What remains is the ending inventory on the balance sheet. A period's
ending inventory becomes the next period's beginning inventory.

To obtain higher income, management could delay making the normal amount of
purchases until the next period and thus include some of the older, lower costs in cost
of goods sold.