Accrued Expense – expense already incurred but

not yet paid

Proforma: Depreciation – systematic allocation of cost of
assets to its useful life
________expense XXX Formula:
________payable XXX
Cost – Residual Value x months
Useful life 12
Accrued Income – income already earned but not
yet collected Proforma:
Proforma:
Depreciation XXX
________receivable XXX Accumulated Depreciation XXX
_________income XXX

Prepaid Expense – expense already paid but not yet

incurred
Proforma:
Asset Method: _________expense XXX
Prepaid_______ XXX

Expense Method: Prepaid__________ XXX

________expense XXX

Unearned Income – income already collected but

not yet earned
Proforma:
Income Method: _______income XXX
Unearned_____ XXX

Liability Method: Unearned______ XXX

______income XXX

Bad Debts / Doubtful Accounts – expense

established for estimated uncollectible accounts
- Based on Sales
 Sales x % uncollectible
- Based on Receivables
 Accounts Receivable x % uncollectible
– Allowance for bad debts

Proforma:

Bad Debts Expense XXX

Allowance for Bad Debts XXX
 Depreciation
expense:
- A portion of the costs of the asset should be
reported as expense in each accounting
period
- All property and equipment except land are
subject to depreciation
- Systematic allocation of cost of assets to its
useful life
3 Factors are involved in computing Depreciation
1. Asset cost is the amount of an entity paid to
acquire the depreciation asset
2. Estimated residual value is the amount that
the asset can probably be sold for at the end
of estimated useful life
3. Estimated useful life is the estimated number
of periods that an entity can make use of the
asset

Straight Line method, one of the methods of

computing depreciation results in the equal Example:
distribution of charges over the life of the asset
The asset was acquired on Jan 1, 2016
The Formula:
Office Furniture Php 10, 500
Depreciable Amount: Cost – Residual Value Residual Value 500
Estimated Useful Life 5 years
Depreciation: Depreciable Amount
Useful Life

Depreciation is computed as follows: Accrued Expense

Depreciable Amount: Php 10, 500 – Php 500 - Expense which has been incurred but not yet
= Php 10, 000 paid.

Depreciation: Php 10, 000 = Php 2, 000 - Expense must be recorded in the accounting
5 years period in which it is incurred.

Depreciation Expense Php 2, 000 Proforma:

Accumulated Depreciation Php 2, 000
- Office Furniture __________ Expense XXX
_________ Payable XXX

2 Approaches
Bad Debts or Doubtful Accounts 1. Based on Sales (Sales x % uncollectible)
2. Based on Receivables (Accounts Receivable x
- Refers to the portion of the Accounts uncollectible)
Receivable which may prove to be
uncollectible Proforma:
- Expense established for estimated
uncollectible accounts Bad Debts XXX
Allowance for Bad Debts XXX