Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
the Accounting
Cycle
2
Learning Objectives
A = L + OE
6
with T-Accounts
DR CR DR CR DR CR
+ - - + - +
8
How Accounts Affect Owners' Equity
Owners' Equity
DR CR
- +
Business Documents
Transactions are the
exchange of goods or
services between entities,
as well as other events that
have an economic impact
on a business.
Business Documents are
records that are evidence
of transactions.
11
2. Journalize Transactions
Journal Entries
A journal is an accounting record in which
business transactions are entered in
chronological order.
Journal entries record transaction
information; debits equal credits.
Journal Page 1
Post
Date Description Ref. Debits Credits
Jan 1 Cash 5
Revenue 5
Received cash for
services provided.
4 Supplies 12
Accounts Payable 12
Purchased supplies
on account.
10 Accounts Payable 12
Cash 12
Paid for supplies.
14
Debits Credits
Cash $ 21
Accounts Receivable 15
Inventory 12
Land 200
Accounts Payable $ 30
Capital Stock 150
Retained Earnings 24
Sales Revenue 919
Cost of Goods Sold 850
Advertising Expense 10
Misc. Expenses 15 ______
Total $ 1,123 $ 1,123
21
5. Adjusting Entries
Adjusting Entries
Identify the original entries that were made,
if any. (Original entries are only made for
unearned revenues and prepaid expenses.)
Determine what the correct balances
should be at this point in time.
Make the adjustments needed to correct the
balances.
25
Example: Depreciation
Rosi, Inc., purchased buildings in 1997 at a
cost of $156,000. Each year, 5% of the cost
is depreciated. At the end of 2002, the
following adjusting entry is made:
Adjusting Entry
12/31 Depreciation Expense--Buildings 7,800
Accumulated Depr.--Buildings
7,800
To record depreciation on
building at 5% per year.
26
Example: Doubtful Accounts
An estimation of bad debts based on the
ending receivables balance reveals that the
allowance account needs to be increased by
$1,100.
Adjusting Entry
12/31 Doubtful Accounts Expense 1,100
Allowance for Doubtful Accounts 1,100
To adjust for estimated doubtful
accounts expense.
27
Example: Doubtful Accounts
Later, assume on March 19 that a $150
receivable is deemed to be uncollectible.
Using the allowance account, the uncollectible
account is written off the books.
Adjusting Entry
12/31 Salaries and Wages Expense 2,150
Salaries Payable 2,150
To record accrued salaries and
wages.
29
Example: Accrued Revenues
Rosi, Inc., holds a note receivable from a
customer on which interest totaling $250 has
accrued.
Adjusting Entry
12/31 Interest Receivable 250
Interest Revenue 250
To record accrued interest on a
note receivable.
30
Example: Prepaid Expenses
Rosi, Inc.’s trial balance shows that the asset
account Prepaid Insurance has a balance of
$8,000. By December 31, only $3,800
applies to future periods.
Adjusting Entry
12/31 Insurance Expense 4,200
Prepaid Insurance 4,200
To record expired insurance.
$8,000 - $3,800
31
Example: Deferred Revenues
Rosi, Inc., receives a payment of $2,550
from a customer prior to the services being
rendered. By December 31, $2,075 in
services have been provided.
Adjusting Entry
12/31 Unearned Rent Revenue 2,075
Rent Revenue 2,075
To record rent revenue
($2,550 - $475).
33
Example: Inventory
Refer to Rosi, Inc.’s trial balance in
this chapter. Note that the firm has
$45,000 in inventory. The year-end
count shows that $51,000 is on
hand. Assume that the firm uses a
periodic system.
34
Example: Inventory
The XYZ Company
Purchases, Purchaseearns a rent revenue
Discounts, and Costofof$500
in 19x8 but will not receive the payment until
Goods Sold are affected by the adjusting
January 10, 19x9. An adjustment will be
entry to update
needed. What the inventory
is the adjustingaccount.
entry?
Adjusting Entry
12/31 Inventory 6,000
Purchases Discounts 3,290
Cost of Goods Sold 153,310
$51,000 - $45,000
Purchases To close 162,500
To adjust inventory, cost of
goods sold, and related To close
accounts.
35
Expenses Revenues
Expenses
The expense account is
Bal. xxx xxx credited in order to close
the account at the end of
the period.
39
Dividends
The End