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Adjusting Entries
LEARNING OBJECTIVES
Discuss the concept of
adjusting entry
LEARNING OBJECTIVES
Identify the purposes of
adjusting entry
LEARNING OBJECTIVES
Identify the major
classifications of
adjusting entry
RECALL
Do you remember the first
half of the Accounting
Cycle?
THE ACCOUNTING CYCLE
Identifying
Journalizing
Posting
Trial Balance
Adjusting Entries
Financial Statements
Closing Entries
Post-Closing Trial Balance
Reversing Entries
ADJUSTING ENTRIES
1) Journal
2) Postings
3) Adjusting entries
IMPORTANT CONCERNS: 13
2) Fiscal year
CUT-OFF PERIOD
1) Accrual of Expenses
2) Accrual of Income
Accrued Expenses
1) Unpaid salaries
2) Unpaid interest expense
3) Unpaid utilities
Pro-forma Adjusting Entry
Expensesaccount xxx
Accrued Expenses/
Expense Payable xxx
Pro-forma Adjusting Entry
December 2016.
Example:
On December 30,2016, the Angel Consultancy hired
a daily wage worker for the maintenance of the
office. Angel follows the calendar year as the
accounting period. The daily wage of the worker is
P300 or a weekly salary of P1800 for six days except
Sundays. Angel Consultancy adopts a weekly salary
scheme, and pays every Saturday.
Example:
1) Prepaid expense
2) Unearned revenue
Prepaid Expenses
1) Prepaid insurance
2) Prepaid advertising
3) Prepaid rent
4) Prepaid interest
5) Supplies on hand
Prepaid Expenses
1) Expense method
2) Asset method
Expense Method
On March 1,2016, Jocelyn Watch Repair Shop paid the rental for
six months amounting to P30 000. The business follows the calendar
year.
1) Revenue/Income method
2) Liability method
Revenue Method
1) Cost
2) Salvage value
3) Useful life
STRAIGHT LINE METHOD
1) Depreciable cost
2) Accumulated depreciation
3) Book value
Depreciable cost
This is equal to the difference between cost and
residual value.
Cost xxx
Less: Estimated residual value xxx
_________________________________________
Depreciable cost xxx
Accumulated depreciation