Are entries used to update the accounts prior to the preparation of Financial Statements because t
Transactions are apportioned properly between the accounting period affected. The accounts affected
that there would be no overstatement of balance sheet items and income statement items.
The process of determining an entity's net income or net loss requires certain income and expense
According to the accrual principle, income is recognized at the time it is actually earned and expense
Thus, a receipt of cash does not necessarily mean a recognition of income, and payment of cash does
Ex. Cash received from a customer for a reservation of a hotel room for twoo weeks
one year insurance premium paid for the insurance of a house.
TYPES:
1. Prepayments
2. Unearned Income
3. Accrued Expenses
4. Accrued Income
5. Bad Debts/Doubtful Accounts
6. Depreciation Expense
1. Prepayments Are expenses already paid but not yet incurred or used.
Example 1: On Oct. 1, 2014, X Co. paid a one-year advance rent for Php 24,000.
Give the adjusting entry on December 31, 2014.
Example 2
On March 31, 2014, B Co. paid Php 72,000 insurance premium for 2 years. Give the adjusting entries o
Example 3:
Supplies account on Jan 1, 2014 showed a balance of Php 7,000. On December 31, 2014, supplies on
Adjusting Entry at the end of the accounting period, Dec. 31, 2014
Supplies Expense
Supplies
To record supplies used.
Example 1: On Nov 30, 2014, A Co. received Php 36,000 advanced rental for 6 months. Give the adjus
Journal Entry upon receipt of cash on Nov. 30, 2014.
Cash 36000
Unearned Income 36000
Received 6 mos rent in advance
Adjusting Entry at the end of Dec. 31, 2014
Unearned Income 6000
Rent Income 6000
To record rent earned for one month
Ex. 2 On May 1, Dr. Young received Php 60,000 for medical fees to be rendered in the next 3 month. G
3. Accrued Expenses Are expenses already incurred or used but not yet paid.
Adjusting Entry at the end of the accounting period
Expenses xxx
Expenses Payable xxx
Ex 1. Unpaid salaries at the end of Dec. 31, 2014 amounted to Php 20,000
Adjusting Entry at the end of Dec.
Expenses 20,000
Salaries Payable 20,000
To record unpaid salaries to date
Ex. 2: The company received a tel bill in the amount of Php 1,200 on Dec 29, 2014 which the company
Adjusting Entry at the end of Dec, 2014
Utilities Expense 1,200
Utilities Payable 1,200
Ex. A one year 10% note receivable in the amount of Php 100,000 was received on January 1, 2014. T
Give the adj journal entry on June 30, 2014.
Ex. 1 Accounts Receivable shows a blance of Php 50,000. It is estimated that 10% of this is uncollectib
Give the adjusting entry on Dec. 31, 2014 for the provision of the estimated uncollectible account.
Formula
Cost
Less: Salvage Value
Depreciable cost
Divided by: Estimated Useful Life
Annual Depreciation
d= PV-SV/n
A building with an estimated useful life of 20 years finished construction on April 1, 2014. The cost of
2.6 Million with an estimated salvage value of Php 200,000. Give the adjusting entry on December 31
incurred or used.
nt initially received.
ed in the next 3 month. Give the Adjusting Journal entry at the end of May.
es to be rendered
ed on January 1, 2014. The interest and the principal are payable on maturity date.
e accounts
accounts
ated useful life.
r and tear of property and equipment due to passage of time.
Adjusting Entry
Dec. 31, 2014 Insurance Expense 13,750.00
Prepaid Insurance 13,750.00
To record expired insurance
2. Borrowed Php 200,000 from Metro Bank issuing a one year note with 12% annual interest on April 3
Adjusting Entry
31-Dec-14 Interest Expense 16,000.00
Interest Payable 16,000.00
To record unpaid accrued interest
3. Bought Php 20,000 equipment with 5 year estimated life and salvage value of Php 2,000.
Cost
Depreciation Expense 3,600.00 Less: Salvage Value
Accumulated Depreciation 3,600.00 Depreciable cost
To record depreciation of equipment Divided by est life
Annual Depreciation
Monthly Depreciation
4
30-Jun-14
Cash 51000 Monthly
Unearned Service Income 51000 Total earne
Adjusting Entry
31-Dec-14 Unearned Service Income 25500
Service Icome 25500
To record service income eraned
5
st 1, 2014. The amount of premium was debited to Prepaid Insurance.
Php 2,000.
20,000.00
ess: Salvage Value 2,000.00
epreciable cost 18,000.00
ivided by est life 5.00
nnual Depreciation 3,600.00
Monthly Depreciation 300.00
4250
25500
Cost 42,000.00
Less: Salvage Value 3,000.00
Depreciable cost 39,000.00
Divided by est life 5.00
Annual Depreciation 7,800.00
Monthly Depreciation 650.00