CO5117IntroductiontoAccounting

SolutionsTopic6,2013

Topic6
Chapter3AccrualAccountingConcepts

DiscussionQuestionChapter6
1.

(a)

Under the accounting period concept, an accountant is required to determine the

impactofeachaccountingtransactionoreventinspecificaccountingperiods.

(b)

Anaccountingtimeperiodofoneyearinlengthisreferredtoasafinancialyear.

6.

The two categories of adjusting entries are prepayments and accruals. Prepayments are
either revenues received in advance or prepayments of amounts that provide economic
benefit for more than one period, e.g. prepaid rent. Accruals consist of revenues and
expensesearnedorincurredbutwhichhavenotbeenrecordedthroughdailytransactions.

In a prepaid expense adjusting entry, expenses are debited and assets are credited. In a
revenue received in advance adjusting entry liabilities are debited and revenues are
credited.

8.

Liability and revenue. The revenue account is debited and liability account (Revenue
ReceivedinAdvance)iscredited.Thisisthenatureoftheadjustingentryiftheoriginalentry
wastorecordtheamountreceivedasrevenue.

PROBLEMSETA3.1
HansLtd
GeneralJournal
(a).

1.

2.

3.

4.

Date
2012
June30

30

30

30

AccountTitles(Narration)

Post
Ref.

SuppliesExpense
505

Supplies($6800$3600)
113
(Toadjustsuppliesaccounttoreflectsuppliesused)
ElectricityExpense
530

ElectricityPayable
218
(Accruedelectricity)

InsuranceExpense
515

PrepaidInsurance
112
(Prepaidinsuranceexpired($480012mthx2)

ServiceRevenueReceivedinAdvance
213

ServiceRevenue
400
(Services performed in relation to revenue received in

advance)

$
Debit

$
Credit

3200

600

800

1500

3200

600

800

1500

CO5117IntroductiontoAccounting
5.

6.

30

30

7.

30

SalariesExpense

SalariesPayable
(Accruedsalaries)
DepreciationExpense

AccumulatedDepreciation OfficeEquipment
($720x2)
(Recorddepreciationexpense)
AccountsReceivable

ServiceRevenue
(Accruedrevenue)

SolutionsTopic6,2013
500
215

3200

520
131

3200

1440

104
400

4000

4000

1440

Studentsneedtolookandseewhathasbeenrecordedintheledgerstoworkoutifoneortwo
monthsadjustmentsarerequired.Forinsuranceanddepreciationnoexpensehadbeenrecordedto
date.

PROBLEMSETA3.2
(a) CombinedServicesLtd
GeneralJournal
Date
AccountName(narration)

1.

2.

3.

4.

5.

6.

7.

2014
June30

30

30

30

30

30

30

SuppliesExpense

Supplies
(Suppliesused$750$500)
ElectricityExpense
ElectricityPayable
(Accruedexpense)
InsuranceExpense

PrepaidInsurance
(Prepaidinsuranceexpired)
RevenueReceivedinAdvance

ServiceRevenue
(torecordrevenuenowearned)
SalariesExpense

SalariesPayable
(Accruedsalaries)
DepreciationExpense

AccumulatedDepreciation
(Depreciationexpense)
AccountsReceivable

ServiceRevenue
(Accruedrevenue)

Post
Ref.
505
113

530
218
515
112

213
400

500
215

520
131

104
400

$
Debit

250

150

800

1500

2300

2,000

2200

$
Credit

250

150

800

1500

2300

2,000

2200