Group 1 presentation1

Expedient Recording MethodExpedient Records an expense upon payment of cash before goods or services are consumed Records revenue upon receipt of cash before goods or services are provi

Impact of Adjusted Entries

 Types of Adjusted Entries

 Examples of Adjusted Entries

 Impact without entries

The Accounting Equation

The Accounting Equation

Relationship among the assets, liabilities and

stockholders’ equity of a business:

The equation must be in balance after every

transaction For every

transaction For every Debit Debit there must be a Credit there must be a Credit .

Illustration 3-3

The Accounting Cycle

The Accounting Cycle

Work Sheet

Illustration 3-6

Types of Adjusting Entries

Types of Adjusting Entries

1 Prepaid Expenses.

Expenses paid in cash and

recorded as assets before

they are used or consumed

Prepayments

3 Accrued Revenues.

Revenues earned but not yet received in cash or recorded

Revenues received in cash

and recorded as liabilities

before they are earned

Accruals

Illustration 3-20

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

Expedient General Entries

Expedient General 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

Service revenue 45,000

Cash 45,000 Dec 1

45,000

Adjusting Entries for “Unearned Revenues”

Adjusting Entries for “Unearned 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

Unearned service revenue 33,750

Service revenue 33,750 Dec 31

33,750(= 45,000-45,000/4)

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

Unearned service revenue (L) 33,750

Service revenue (SE) 33,750 Dec 31 (= 45,000-45,000/4)

Impact Without Adjusted Entries

Total Assets Total Liab Equity Stk. Income Net Retained Earning

None

Understate

Standard Recording Method

Standard

before goods or services are provided

Standard General Entries

Standard General Entries

Q1 : On December 1, 2011, Johnson received a $45,000 payment for

services to be rendered equally over a four-month period

Unearned service revenue 45,000

Cash 45,000 Dec 1

45,000

Adjusting Entries for “Unearned Revenues”

Adjusting Entries for “Unearned Revenues”

Q1 : On December 1, 2011, Johnson received a $45,000 payment for

services to be rendered equally over a four-month period

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

Cash 16,000

Prepaid Advertising 16,000 Dec 31

Adjusting Entries for “Prepaid Expenses”

Adjusting Entries for “Prepaid Expenses”

Salaries payable 8,400

Salaries expense 8,400 Dec 31

Debit Credit

Salaries Expense

Debit CreditSalaries Payable

Adjusting Entries for “Accrued Expenses”

Adjusting Entries for “Accrued Expenses”

$8,400 will be paid on January 5, 2012

Salaries payable(L) 8,400

Salaries expense(SE) 8,400 Dec 31

Adjusting Entries for “Accrued Expenses”

Adjusting Entries for “Accrued Expenses”

$8,400 will be paid on January 5, 2012

Total Assets Total Liab Equity Stk. Income Net Retained Earning

Interest payable 900

Interest expense 900 Dec 31

Debit Credit

Interest Expense

Debit CreditInterest Payable

Adjusting Entries for “Accrued Expenses”

Adjusting Entries for “Accrued 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)

Interest payable(L) 900

Interest expense(SE) 900 Dec 31

Adjusting Entries for “Accrued Expenses”

Adjusting Entries for “Accrued 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)

Total Assets Total Liab Equity Stk. Income Net Retained Earning

Allowance for Doubtful Accounts 8,000

Bad Debt Expense 8,000 Dec 31

Debit Credit

Bad Debt Expense

Debit Credit

Allowance for Doubtful Accounts

Adjusting Entries for “Accrued Expenses”

Adjusting Entries for “Accrued Expenses”

Q5. On December 31, 2011, it was determined that $8,000 of the recorded Accounts receivable would prove to be uncollectible

Impact Without Adjusted Entries

Total Assets Total Liab Equity Stk. Income Net Retained Earning

Overstated

8000 None Overstated8000 Overstated8000 Overstated8000

Q5. On December 31, 2011, it was determined that $8,000 of the recorded Accounts receivable would prove to be uncollectible

Allowance for Doubtful Account (A) 8,000 Bad Debt Expense (SE) 8,000

Dec 31

Impact Without Adjusted Entries

Total Assets Total Liab Equity Stk. Income Net Retained Earning

Understate 8400

Overstate 8400

Overstate 8400

Overstate 8400

Q5 Overstated 8000 None Overstated8000 Overstated8000 Overstated8000

Total

Overstate 8000

Understate 43050

Overstate 51050

Overstate 51050

Overstate 51050

Revenue

Questions