Accounting Journal Entries and Adjustments

Journal entries are used to record the financial activity of a business in an organized way, ensuring that every transaction is properly accounted for. They are based on the double-entry accounting system, which mandates that for every debit, there's an equal credit, maintaining the balance of the accounting equation: Assets = Liabilities + Equity.

Adjusting entries are made at the end of an accounting period to ensure that revenues and expenses are recorded in the appropriate periods. They address situations where transactions are not fully reflected in the financial records.

Unearned revenue represents revenue received but not yet earned. For example, if a company receives rent in advance, it's recorded as a liability until the services are performed.

Accrued salaries are salaries earned by employees but not yet paid. Adjusting entries are used to recognize these expenses in the current period, even though payment is due later.

Long-term liabilities are debts or obligations that a company expects to settle in more than one year. Examples include bonds payable and long-term leases.

Analyzing long-term liabilities is crucial because it helps investors and creditors assess a company's ability to manage its debts. This analysis helps them understand the company's financial health and ability to meet its obligations.

The owners' claim on a business's assets after liabilities are paid off. It includes common stock, preferred stock, retained earnings, and additional paid-in capital.

A portion of profits distributed to stockholders.

Preferred stockholders are paid before common stockholders, especially for cumulative preferred stock, which means any missed dividends from previous years must be paid before common stockholders receive anything.

When bonds are sold at a premium (above face value) or discount (below face value), the difference is amortized over the life of the bond to spread the financial impact evenly.

The premium or discount is divided evenly across the bond's life, reducing the interest expense each year.

Paying off bonds before they mature. Companies do this to reduce interest costs or take advantage of favorable financial conditions.

When a company retires bonds for less than their carrying value, resulting in a gain.

When a company retires bonds for more than their carrying value, resulting in a loss.

To accurately record the financial impact of retiring bonds early, any gain or loss is reflected in the financial statements.

Accounting focuses on telling the story of a business's financial health. Understanding the reasons behind accounting entries helps connect rules to real-world scenarios.