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All revenues received or all expenses paid in advance cannot be reported on the income statement for the current accounting period. They must be assigned to the relevant accounting periods and reported on the relevant income statements. Adjusting entries are accounting journal entries that convert a company’s accounting records to the accrual basis of accounting.

If this process is not handled correctly you run the risk of overstating income. As an example if you create the invoice and then deposit a check directly into the bank register without receiving the payment against the invoice you will overstate income. The reason is you have recorded the income when you created the invoice.

What is a more telling indicator of a company’s short-term liquidity is an increasing or decreasing trend in their net WC. change in net working capital formula A company with a negative net WC that has continual improvement year over year could be viewed as a more stable business than one with a positive net

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He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University. The number of closing activities may be quite substantially longer than