Group 1 presentation1
Bạn đang xem bản rút gọn của tài liệu. Xem và tải ngay bản đầy đủ của tài liệu tại đây (236.45 KB, 24 trang )
Impact of Adjusted Entries
by Group 1
Fernando Casco-Downing, Katie
Fleming, Michael Kubik, Emily
Stone, Fei Wang
Chapter
3-1
Introduction
Accounting
Equation (A= L + SE)
Accounting Cycle
Accounting Concepts
Revenue
Expense
Revenue Recognition
Matching Principle
Types
of Adjusted Entries
Examples of Adjusted Entries
Impact without entries
Chapter
3-2
The
The Accounting
Accounting Equation
Equation
Relationship among the assets, liabilities and
stockholders’ equity of a business:
Illustration 3-3
The equation must be in balance after every
transaction. For every Debit there must be a Credit.
Chapter
3-3
The
The Accounting
Accounting Cycle
Cycle
Illustration 3-6
Transactions
Transactions
9.
9. Reversing
Reversing entries
entries
1.
1. Journalization
Journalization
8.
8. Post-closing
Post-closing trail
trail balance
balance
2.
2. Posting
Posting
7.
7. Closing
Closing entries
entries
3.
3. Trial
Trial balance
balance
6.
6. Financial
Financial Statements
Statements
Work
Work
Sheet
Sheet
5.
5. Adjusted
Adjusted trial
trial balance
balance
Chapter
3-4
4.
4. Adjustments
Adjustments
Adjusting
Adjusting Entries
Entries
Revenues - recorded in the period in which they
are earned.
earned
Expenses - recognized in the period in which they
are incurred.
incurred
Adjusting entries - needed to ensure that the
revenue recognition and matching principles are
followed.
Chapter
3-5
Types
Types of
of Adjusting
Adjusting Entries
Entries
Illustration 3-20
Prepayments
Accruals
1. Prepaid Expenses.
Expenses paid in cash and
recorded as assets before
they are used or consumed.
3. Accrued Revenues.
Revenues earned but not
yet received in cash or
recorded.
2. Unearned Revenues.
Revenues received in cash
and recorded as liabilities
before they are earned.
4. Accrued Expenses.
Expenses incurred but not
yet paid in cash or
recorded.
Chapter
3-6
Expedient Recording Method
Expedient
Records an expense upon payment
of cash before goods or services
are consumed
Records revenue upon receipt of
cash before goods or services are
provided
Chapter
3-7
Expedient
Expedient General
General Entries
Entries
Q1 : On December 1, 2011, Johnson received a $45,000 payment for
services to be rendered equally over a four-month period. Service revenue
was credited.
Dec. 1
Cash
45,000
Service revenue
45,000
Service Revenue
Debit
Credit
45,000
45,000
Chapter
3-8
Cash
Debit
45,000
45,000
Credit
Adjusting
Adjusting Entries
Entries for
for “Unearned
“Unearned Revenues”
Revenues”
Q1 : On December 1, 2011, Johnson received a $45,000 payment for
services to be rendered equally over a four-month period. Service revenue
was credited.
Dec. 31
Service revenue
33,750
Unearned service revenue
Service Revenue
Debit
33,750
Credit
45,000
11,250
Chapter
3-9
(=45,000-45,000/4)
33,750
Unearned Service Revenue
Debit
Credit
33,750
33,750
Impact Without Adjusted Entries
Q1 : On December 1, 2011, Johnson received a $45,000 payment for
services to be rendered equally over a four-month period. Service revenue
was credited.
Dec. 31
Service revenue (SE)
33,750
Unearned service revenue (L)
Total
Assets
None
Chapter
3-10
(=45,000-45,000/4)
33,750
Total
Liab.
Stk.
Equity
Net
Income
Retained
Earning
Understate
33750
Overstate
33750
Overstate
33750
Overstate
33750
Standard Recording Method
Standard
Asset upon payment of cash
Liability upon receipt of cash
before goods or services are
provided
Chapter
3-11
Standard
Standard General
General Entries
Entries
Q1 : On December 1, 2011, Johnson received a $45,000 payment for
services to be rendered equally over a four-month period.
Dec. 1
Cash
45,000
Unearned service revenue
Unearned Service Revenue
Debit
Credit
45,000
45,000
Chapter
3-12
45,000
Cash
Debit
45,000
45,000
Credit
Adjusting
Adjusting Entries
Entries for
for “Unearned
“Unearned Revenues”
Revenues”
Q1 : On December 1, 2011, Johnson received a $45,000 payment for
services to be rendered equally over a four-month period.
Dec. 31
Unearned service revenue
11,250
Service revenue
Service Revenue
Debit
Credit
11,250
11,250
Chapter
3-13
11,250
Unearned Service Revenue
Debit
11,250
Credit
45,000
33,750
Expedient Vs. General
Expedient
Service Revenue
Debit
33,750
Credit
Unearned Service Revenue
Debit
45,000
Credit
33,750
11,250
33,750
Unearned Service Revenue
General
Service Revenue
Debit
Credit
11,250
11,250
Chapter
3-14
Debit
11,250
Credit
45,000
33,750
Adjusting
Adjusting Entries
Entries for
for “Prepaid
“Prepaid Expenses”
Expenses”
Q2. On December 31, 2011, the company paid a local radio station
$16,000 for 40 radio ads that were to be aired, 20 per month, throughout
January and February of 2012. Prepaid advertising was debited.
Dec. 31
Prepaid Advertising
16,000
Cash
16,000
Prepaid Advertising
Debit
16,000
16,000
Chapter
3-15
Credit
Cash
Debit
Credit
16,000
Adjusting
Adjusting Entries
Entries for
for “Accrued
“Accrued Expenses”
Expenses”
Q3. Employee salaries for the month of December 2011 totaling
$8,400 will be paid on January 5, 2012.
Dec. 31
Salaries expense
8,400
Salaries payable
Salaries Expense
Debit
8,400
8,400
Chapter
3-16
Credit
8,400
Salaries Payable
Debit
Credit
8,400
Adjusting
Adjusting Entries
Entries for
for “Accrued
“Accrued Expenses”
Expenses”
Q3. Employee salaries for the month of December 2011 totaling
$8,400 will be paid on January 5, 2012.
Dec. 31
Salaries expense(SE)
8,400
Salaries payable(L)
Chapter
3-17
8,400
Total
Assets
Total
Liab.
Stk.
Equity
Net
Income
Retained
Earning
None
Understate
8400
Overstate
8400
Overstate
8400
Overstate
8400
Adjusting
Adjusting Entries
Entries for
for “Accrued
“Accrued Expenses”
Expenses”
Q4. On September 31, 2011, Johnson Corp. borrowed $60,000 from a local
bank. A note was signed with principal and 6% interest to be paid on
September 1, 2012.
(Interest = 60,000 * 6% /12 *3)
Dec. 31
Interest expense
900
Interest payable
Interest Expense
Debit
900
Chapter
3-18
Credit
900
Interest Payable
Debit
Credit
900
Adjusting
Adjusting Entries
Entries for
for “Accrued
“Accrued Expenses”
Expenses”
Q4. On September 31, 2011, Johnson Corp. borrowed $60,000 from a local
bank. A note was signed with principal and 6% interest to be paid on
September 1, 2012.
(Interest = 60,000 * 6% /12 *3)
Dec. 31
Interest expense(SE)
900
Interest payable(L)
Chapter
3-19
900
Total
Assets
Total
Liab.
Stk.
Equity
Net
Income
Retained
Earning
None
Understate
900
Overstate
900
Overstate
900
Overstate
900
Adjusting
Adjusting Entries
Entries for
for “Accrued
“Accrued Expenses”
Expenses”
Q5. On December 31, 2011, it was determined that $8,000 of the recorded
Accounts receivable would prove to be uncollectible.
Dec. 31
Bad Debt Expense
8,000
Allowance for Doubtful Accounts
Bad Debt Expense
Debit
8,000
Chapter
3-20
Credit
8,000
Allowance for Doubtful Accounts
Debit
Credit
8,000
Impact Without Adjusted Entries
Q5. On December 31, 2011, it was determined that $8,000 of the recorded
Accounts receivable would prove to be uncollectible.
Dec. 31
Bad Debt Expense (SE)
8,000
Allowance for Doubtful Account (A)
Total
Assets
Overstated
8000
Chapter
3-21
8,000
Total
Liab.
Stk.
Equity
Net
Income
Retained
Earning
None
Overstated
8000
Overstated
8000
Overstated
8000
Impact Without Adjusted Entries
Total
Assets
Total
Liab.
Stk.
Equity
Net
Income
Retained
Earning
Q1
None
Understat
e 33750
Overstate
33750
Overstate
33750
Overstate
33750
Q2
None
None
None
None
None
None
Understat
e 8400
Overstate
8400
Overstate
8400
Overstate
8400
Q4
None
Understat
e 900
Overstate
900
Overstate
900
Overstate
900
Q5
Overstated
8000
None
Overstated
8000
Overstated
8000
Overstated
8000
Overstate
51050
Overstate
51050
Overstate
51050
Q3
Overstate Understat
Total
8000
e 43050
Chapter
3-22
Conclusion
Accounting
Concepts
Revenue and Expense
Revenue Recognition and Matching Principle
Standard
Vs. Expedient Recording Method
Types of Adjusted Entries
Prepayments : Prepaid Expense and Unearned Revenue
Accruals: Accrued Rev. and Accrued Exp.
Impact
Chapter
3-23
without adjusted entries
Overstated A, L, SE, NI, RE
Understated A, L, SE, NI, RE
Questions
Chapter
3-24
