Financial accounting chapter 03 adjusting accounts IFRS

Financial accounting chapter 03 adjusting accounts IFRS kế toán tài chính doanh nghiệp, chương 03, phương pháp điều chỉnh tài khoản kế toán, international financial reporting standards. tiêu chuẩn quốc tế về báo cáo kế toán tài chính.

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Financial Accounting IFRS Edition, 2e Weygandt Kimmel Kieso

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Cash-Basis Accounting

 Cash-basis accounting is not in accordance with

International Financial Reporting Standards (IFRS).

Accrual- vs Cash-Basis Accounting

LO 2 Explain the accrual basis of accounting.

Timing Issues

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Accrual-Basis Accounting

 Transactions recorded in the periods in which the

events occur.

performed, rather than when cash is received

when paid.

Accrual- vs Cash-Basis Accounting

Timing Issues

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Revenue Recognition Principle

Recognizing Revenues and Expenses

Recognize revenue in the

accounting period in which the

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Expense Recognition Principle

Recognizing Revenues and Expenses

Match expenses with

revenues in the period when

the company makes efforts to

generate those revenues.

“Let the expenses follow

the revenues.”

Timing Issues

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1 Prepaid Expenses.

Expenses paid in cash before

they are used or consumed.

The Basics of Adjusting Entries

LO 4 Identify the major types of adjusting entries.Types of Adjusting Entries

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Payment of cash, that is recorded as an asset because

service or benefit will be received in the future.

Prepayments often occur in regard to:

LO 5 Prepare adjusting entries for deferrals.

Prepaid Expenses

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Illustration: Pioneer Advertising Agency

purchased supplies costing $2,500 on

October 5 Pioneer recorded the payment

by increasing (debiting) the asset

Supplies This account shows a balance

of $2,500 in the October 31 trial balance

An inventory count at the close of

business on October 31 reveals that

$1,000 of supplies are still on hand

Supplies expense 1,500Oct 31

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Illustration: On October 4, Pioneer

Advertising paid $600 for a one-year fire

insurance policy Coverage began on

October 1 Pioneer recorded the payment

by increasing (debiting) Prepaid

Insurance This account shows a balance

of $600 in the October 31 trial balance

Insurance of $50 ($600 ÷ 12) expires

each month

Prepaid insurance 50

Insurance expense 50Oct 31

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Receipt of cash that is recorded as a liability because service

has not be performed.

Unearned revenues often occur in regard to:

Unearned Revenues

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Illustration: Pioneer Advertising received $1,200 on October 2

from R Knox for advertising services expected to be completed by December 31 Unearned Service Revenue shows a balance of

$1,200 in the October 31 trial balance Analysis reveals that the

company earned $ 400 of those fees in October

Unearned service revenue 400Oct 31

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Accrued revenues often occur in regard to:

Accrued Revenues

LO 6 Prepare adjusting entries for accruals. BEFORE Cash Receipt

Revenue Recorded

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Illustration: In October Pioneer Advertising

Agency recognized $200 for advertising

services performed but not recorded

Accounts receivable 200

Nov 10

LO 6 Prepare adjusting entries for accruals.

200Service revenue 200Accounts receivable

Oct 31

On November 10, Pioneer receives cash of

$ 200 for the services performed

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Accrued expenses often occur in regard to:

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Illustration: Pioneer Advertising signed a three-month note

payable in the amount of $5,000 on October 1 The note requires

Pioneer to pay interest at an annual rate of 12%

Interest payable 50

Interest expense 50Oct 31

LO 6 Prepare adjusting entries for accruals.

Illustration 3-17

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Team Quiz #1

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Micro Computer Services Inc began operations on August 1,

2014 At the end of August 2014, management attempted to

prepare monthly financial statements The following information

relates to August Prepare the adjusting journal entries needed at August 31, 2014 (Amounts are in Chinese yuan.)

1 At August 31, the company owed its employees ¥8,000 in

salaries and wages that will be paid on September 1

LO 6

Salaries and wages expense 8,000

Salaries and wages payable 8,000

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3-19 LO 6

Interest expense (¥ 300,000 x 10% x 1/12) 2,500

2 At August 1, the company borrowed ¥300,000 from a local

bank on a 15-year mortgage The annual interest rate is 10%

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3-20 LO 6

Accounts receivable 11,000

Service revenue 11,000

3 Revenue for services performed but unrecorded for August

totaled ¥11,000

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Team Quiz #2

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3-22

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 Prepared after all adjusting entries are journalized and

posted.

 Purpose is to prove the equality of debit balances and

credit balances in the ledger

 Is the primary basis for the preparation of financial

statements.

LO 7 Describe the nature and purpose of an adjusted trial balance.

The Adjusted Trial Balance

Adjusted Trial Balance

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Financial Statements are prepared directly from the

Statement

of Financial Position

Income Statement

Retained Earnings Statement

LO 7 Describe the nature and purpose of an adjusted trial balance.

Preparing Financial Statements

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3-27 LO 7

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3-28 LO 7

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Homework #1

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3-30

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Homework #2

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3-32

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