Financial reports are used to see how a business is performing and therefore they should accurately reflect how the business performed during the period under review. The matching principle or accruals basis of an accounting system records more accurately the true revenues earned and costs paid for the period in question. The cost of rent and capital purchases are spread over the life of the purchase rather than distorting the accounts in the period the purchase was made. Likewise wages owing or interest payable is spread pulled into the period where they were used rather than when they were paid.
In this accounting course students will learn how to determine if an account needs adjustment entries due to the matching principle concept. They will be introduced to the two classes and four types of adjustments resulting from unearned revenue, prepaid expenses, accrued expenses and accrued revenue, along with typical examples of each type of adjustment. Depreciation is explored in more detail as the effect on the balance sheet can be significant.
This accounting course will be of great interest to entrepreneurs and business professionals who would like to get a thorough introduction to accounting principles, and to any learner who is interested in accounting as a future career.