GROUP MEMBERS:

joshi Rashmi maharjan Nisha shrestha Jashmita shrestha

Manisha

Accrual basis of accounting

Cash basis of accounting

Journal entries made at the end of the period by the company based on accrual accounting Not needed for the cash basis

Deferred expenses
Deferred revenue Accrual assets Accrual liabilities

Cash paid before expenses are incurred Costs are initially recorded as assets and allocated to expenses in future periods Examples:

Prepaid expenses Office supplies Property and equipment

Prepaid salary for the month of January

Adjustment entries
DATE PARTICULARS L. F Dr.(amt) Cr.(amt)

Jan 1

Prepaid salary cash

Salary prepaid salary

2000

2000

Jan 31

2000

2000

Cash received before revenue is earned Receipts are initially recorded as liabilities and recorded as revenues in future periods when earned Examples:
Advance Insurance Advance Subscriptions

Advance salary received for the month February

Adjustment entries
DATE Feb 1 Feb 29 PARTICULARS Cash advance salary Advance salary salary LF Dr.(amt) 5000 5000 Cr.(amt) 5000 5000

Revenue earned before cash is received

Record revenue in period earned; receive payment in a future period Examples:
Rent receivable Interest receivable

Interest receivable within the first 10 days of the following month

Adjustment entries

DATE March 1 April 9

PARTICULARS Interest receivable interest revenue Cash

LF Dr.(amt) 1500

Cr.(amt) 1500

interest receivable

1500

1500

Expenses is incurred before cash is paid

Record expense in period incurred; pay for it in a future period Examples:
Payroll payable Taxes payable Interest payable

interest payable within the first 10 days of the month

Adjustment entries

DATE Jan 1

PARTICULARS Interest expense interest payable

LF

Dr.(amt) 2000

Cr.(amt) 2000 2000

Feb 8

Interest payable cash

2000