In this lesson, we will

discuss the details of

entries that need
adjustment.

Continuation Adjusting Entry

The following are indicators that an accrual basis of accounting is in use.

1. Recognition of accounts receivable

2. Recognition of accounts payable
3. Recognition of bad debts expense (uncollectible accounts)
4. Recognition of depreciation of property plant and equipment
5. Recognition of prepaid expense
6. Recognition of accrued expenses or expenses payable
7. Recognition of cash receipts for income not yet earned.

Recognition of Bad Debts:

Bad debts expense xx

Allowance for bad debts xx

Allowance for bad debts xx

Accounts Receivable xx

Recognition of Depreciation of Property, plant and Equipment

Depreciation Expense xx

Accumulated Depreciation xx
 Accumulated Depreciation xx

Property, plant, equipment xx

Formula: cost of prop, plant, equip. – scrap value = depreciation per year.

Estimated life in years

Recognition of Prepaid Expense:

Asset Method Prepaid xx

Cash xx

Expense xx

Prepaid xx

Expense Method Expense xx

Cash xx

Prepaid xx

Expense xx

Recognition of Accrued or Expense Payable:

Expense xx

Payable xx

Recognition of cash received for income not yet earned:

Liability Method Cash xx

Unearned Income xx

Unearned Income xx
 Income xx

Income Method Cash xx

Service Income xx

Service Income xx

Unearned Income xx

Resources:

1. https://www.youtube.com/watch?v=C8UuX75ZarU

2. https://www.youtube.com/watch?v=VH3u_5PN1sc

3. https://www.youtube.com/watch?v=yrFBRfilyIg

4. https://www.youtube.com/watch?v=X-fiBTfSJ74