Prepared by

Financial Accounting
Chapter 3 – Adjusting the accounts
 FCES Students’ Council Financial Accounting - Chapter 3

‫ بتاع‬normal balance ‫ و ال‬transaction ‫ بتاعه اي‬recording process ‫ال فات اتكلمنا عن ال‬
‫ ي‬chapter ‫ال‬
‫ر‬
‫ و‬accrual basis ‫ ده هنشح ال‬chapter‫ و ال‬general ledger ‫ و‬trial balance ‫ و ازاي نعمل‬account ‫كل‬
adjusted trial balance ‫ و كمان طبيعة و سبب ال‬deferrals ‫ و ال‬accruals ‫ لل‬adjusting entries ‫كمان ال‬
..‫ف يال بينا نبدأ‬

Accrual basis of accounting and the reasons for adjusting entries

• Time period assumption: accountants divide the economic life of a business into
artificial time periods generally a:
1. Month
2. Quarter year
3. year
• Terminology: the time period assumption is also called the periodicity assumption.

‫يعن مش زي ما بنستخدم‬‫ن‬ ‫ن‬

‫ ي‬،‫هنا بيقولك ان المحاسبي بيقسموا الوقت بتاع الحسابات المالية وقفا للحياة االقتصادية‬
‫ ال هما عملوا وقت صناع من ر‬،‫الوقت ف الحياه اليومية بتاعتنا‬
)‫ شهر‬12( ‫اختاعهم هما و قسموا السنة الواحدة‬ ‫ي‬
‫ن‬
) ‫ شهور‬3 ‫يعن كل‬ ‫ر‬
‫ه ان اسلوب المحاسبة بيبق اما شهري او ربــع سنوى ( ي‬ ‫تعتت اسمها السنة المالية ) و ي‬
‫ اقسام ( ر‬3 ‫ل ـ‬
‫ عن الحالة المالية ر‬report ‫ بيعملوا ايه ف الوقت ده ؟ بيطلعوا‬،‫او سنوي‬
.‫للشكة‬
• Fiscal and calendar years
o Monthly and quarterly time periods are called interim periods.
o Most large companies must prepare both quarterly and annual financial statements.
o Fiscal Year = Accounting time period that is one year in length.
o Calendar Year = January 1 to December 31.
‫بمعن اخر ر‬
‫ عشان بنتقل من‬،‫فتة انتقالية‬ ‫ن‬ ‫هنا بيقول ان ر‬
‫ او‬interim periods ‫الفتة الشهرية او الربــع سنوية اسمها‬
‫ي‬
.‫مرحلة مالية لمرحلة مالية تانية‬
.‫الل هما الربــع سنوى و السنوى‬ ‫و ان ر ر‬
‫ ي‬financial statements ‫اكت الشكات الزم تطلع التقارير الماليه‬
‫يعن كل رشكة بتستخد النظام المال‬
‫ن‬ ‫ن‬
‫ ي‬،‫ه سنة مخصصه للمحاسبي بس‬ ‫ ي‬fiscal year ‫قالنا هنا ان السنة المالية‬
‫ أل ممكن تبدأ ف اغسطس او مايو حسب‬،‫ديسمت‬ ‫ مش تكون من يناير ل ـ‬،‫امن‬ ‫ر‬ ‫بتحدد سنتها المالية بتبدأ ر‬
‫ر‬ ‫تنته ي‬
‫ي‬ ‫امن و‬
‫ ال يل احنا بنستخدها ف حياتنا‬calendar year ‫الل بيفرقها عن ال ـ‬ ‫ر‬ ‫ر‬
‫ شهر و ده ي‬12 ‫ المهم يبق مدتها‬،‫اختيار كل شكه‬
.‫اليوميه عادي‬
Question: The time period assumption states that:
a. revenue should be recognized in the accounting period in which it is earned.
b. expenses should be matched with revenues.
c. the economic life of a business can be divided into artificial time periods.

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 FCES Students’ Council Financial Accounting - Chapter 3

d. the fiscal year should correspond with the calendar year.

• Accrual-basis accounting:
1. Transactions recorded in the periods in which the events occur.
2. Companies recognize revenues when they perform services (rather than when they
receive cash).
3. Expenses are recognized when incurred (rather than when paid).
4. In accordance with generally accepted accounting principles (GAAP).
‫ ايه‬transaction ‫الل الزم نستخدمها لما نسجل‬‫ و ي‬GAAP ‫الل بتتطابق مع ال‬
‫ دي القواعد ي‬accrual-basis ‫ال‬
.‫ مش قبل ميعاده او قبله‬،‫الل هو حصل فيه اصال‬
‫ ي‬period ‫الل بيحصل وقتها ؟ بنسجله ف ـ نفس الوقت‬
‫ي‬
‫الل هو مقابلها‬ ‫ر‬
‫ ي‬cash ‫ مش وقت ما تستلم الـ‬،‫ بعد ما تعمل الخدمة علطول‬revenue ‫و ان الشكة الزم تسجل ال ـ‬
‫ن‬
.‫ بتاريخه‬transaction ‫يعن بتتعامل مع كل‬
‫ ي‬،‫ بتسجله برضو‬cash ‫ و اول ما تستلم الـ‬, ‫اصال‬
.‫ مش بس لما بدفعه‬،‫بالل عليا‬
‫بتجيل فاتورة مثال ي‬
‫ي‬ ‫ بسجلها اول ما‬،expenses ‫و كذلك ال ـ‬
❖ Cash-basis accounting
1. Revenues recognized when cash is received.
2. Expenses recognized when cash is paid.
3. Cash-basis accounting is not in accordance with generally accepted accounting
principles (GAAP).
‫ و‬،accrual ‫ه غلط و مش بنستخدمها النها عكس الـ‬ ‫ر‬
‫بالتال ي‬
‫ي‬ ‫ فـ‬GAAP ‫تتماش مع الـ‬ ‫ ال‬cash basis ‫بيقول هنا ان ال ـ‬
‫ر‬
.‫ مش بيعتف بيها غت لما يدفعها‬expenses ‫ و كذلك ال‬cash ‫عتت انه حقق ايرادات اول ما يستلم ال‬‫هو هنا بي ر‬
NB: accrual-basis versus cash-basis accounting.
• Recognizing revenues and expenses
Revenue recognition principles: recognize revenue in the
accounting period in which the performance obligation is
satisfied.
‫ينته و الـ‬ service ‫الشكة بانها تعمل الـ‬ ‫ بيتسجل لما ر ن‬revenue ‫ال‬
‫التام ر‬
‫ي‬
.‫ يدفع الفلوس‬customer

Expense recognition principle: match expenses with revenues in the period when the
company makes efforts that generate those revenues.

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 FCES Students’ Council Financial Accounting - Chapter 3

‫يعن لو عندنا‬‫ن‬ ‫ن‬ ‫ن‬

‫ ي‬, expenses ‫ و الـ‬revenue ‫ده معناه ان احنا هتبط بي الـ‬
‫ الزم نربطه‬, ‫ تخزين و تسويق و توصيل و هكذا‬expenses ‫منتج رصفنا عليه‬
.‫هييج منه‬
‫ر ي‬ ‫الل‬
‫ ي‬revenue ‫بالـ‬
- Let the expenses follow the revenues.

Question: One of the following statements about the accrual basis of accounting is
false? That statement is:
a. Events that change a company’s financial statements are recorded in the periods in
which the events occur.
b. Revenue is recognized in the period in which the performance obligation is satisfied.

c. The accrual basis of accounting is in accord with generally accepted accounting

principles.
d. Revenue is recorded only when cash is received, and expenses are recorded only
when cash is paid.

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 FCES Students’ Council Financial Accounting - Chapter 3

Adjusting entries
• The need for adjusting entries:
1. Ensure that the revenue recognition and expense recognition principles are
followed.

2. Necessary because the trial balance may not contain up-to-date and complete data.
3. Required every time a company prepares financial statements.
4. Will include one income statement account and one balance sheet account.
financial ‫ و انها مهمه لتحديث ال ـ‬،‫ دى مهمة ألنها بتتأكد من اتباع القواعد‬adjusting entries ‫هنا بيقول ان ال ـ‬
‫ بتاعته انه مش‬limitation ‫ من ال ـ‬trial balance ‫ ان ال ـ‬ch.2 ‫ ألن زى ما قلنا فـ‬،‫الشكة‬ ‫ بتاعت ر‬statements
‫ و ه انها بتحدث البيانات المالية‬adjusting entry ‫ و هنا يظهر دور ال ـ‬،‫دايما بيكون حديث او بتاري ــخ حديث‬
one balance sheet ‫ و‬one income statement ‫بيبق جواها‬ ‫ و عشان كده ر‬up to date ‫عشان تكون‬
‫متسجل عليهم البيانات المالية الحديثة ر‬
.‫للشكة‬
NB: adjusting entries are made to ensure that:
1. Expenses are recognized in the period in which they are incurred.
2. Revenues are recorded in the period in which services are performed.
3. Balance sheet and income statement accounts have correct balances at the end of
an accounting period.
‫ و ان ال‬،‫ اتسجلت ن يف نفس وقت تقديمها‬expenses ‫ بتأكدلنا ان ال‬adjusting entries ‫بنقول هنا ان ال‬
.‫ كمان اتسجلت ن يف نفس وقت استالمها‬revenues
Question: Adjusting entries are made to ensure that:
a. expenses are recognized in the period in which they are incurred
b. revenues are recorded in the period in which services are performed.
c. balance sheet and income statement accounts have correct balances at the end of an
accounting period.
d. all of the above.

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 FCES Students’ Council Financial Accounting - Chapter 3

Types of adjusting entries

• Deferrals:
- Prepaid expenses: Expenses paid in cash before they are used or consumed.
- Unearned revenues: Cash received before services are performed.
• Accruals:
- Accrued revenues. Revenues for services performed but not yet received in cash or
recorded.
- Accrued expenses. Expenses incurred but not yet paid in cash or recorded.
‫الل‬accrual ‫الل ه الدفع المسبق و التانيه ه ال ـ‬ ‫ن‬
‫ ي‬deferrals ‫ هما ال ـ‬adjusting entries ‫عندنا نوعي من ال ـ‬
‫ن‬
‫يعن ايه الكالم ده ؟‬
‫ ي‬،‫ه التحصيل المؤجل‬ ‫ي‬
‫ زي ما‬expenses ‫ ه انك تدفع فلوس الخدمه الل انت لسه مخدتهاش اصال و ده ف الـ‬deferrals ‫ الـ‬-
‫الل انت لسه‬ ‫ر‬
‫ ي‬service ‫ او انك ك ـ شكة تاخد فلوس ال ـ‬،‫ للسنه كلها قبل ما السنة تبدأ اصال‬insurance ‫تدفع‬
.‫معملتهاش مقدما‬
‫ن‬
expense ‫ او انك تستفيد بـ‬revenue ‫ و بعد كده أخد تمنها و ده ف الـ‬service ‫ان بقدم‬ ‫ ه ي‬accruals ‫ الـ‬-
.) ‫تنته تدفع الل عليك‬ ‫ن‬
‫يعن بعد ما المده دي‬
‫ي‬ ‫ مثال لمده معينه و تدفع تمنها بعدين ( ي‬rent ‫زى الـ‬

❖ Deferrals are expenses or revenues that are recognized at a date later than the point when
cash was originally exchanged. There are two types:

1. Prepaid expenses
2. Unearned revenues
▪ Prepaid expense: payment of cash, that is recorded as an asset to show the service or
benefit the company will receive in the future.

Expense
Cash Before
recorded
NB: Prepayments often occur in regard to:
o Insurance
o Supplies
o Advertising
o Rent
o Equipment

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 FCES Students’ Council Financial Accounting - Chapter 3

o Buildings
‫ن‬
) ‫الخ‬...‫المبان‬
‫ي‬ ‫(غالبا ما بيكون الدفع مقدم ن يف التأمينات و المعدات و األيجارات واالعالنات و رشاء‬
• Expire either with the passage of time or through use so we make adjusting entry for it
always to make it up to date by:

1. Increase (debit) to an expense account.

2. Decrease (credit) to an asset account.

‫ بأننا نزود‬adjusting ‫ عشان كده الزم نعملها‬،assets ‫طبيع انها تقلل ال ـ‬ ‫ ر ن‬expenses ‫لما الوقت بيمر ال ـ‬
‫بتيد و‬
‫ي‬
.‫ فـ هنعكسه‬،‫ ألنه نقص‬assets by credit ‫ و هنقلل الـ‬expenses by debit ‫الـ‬

• For example, pioneer advertising purchased supplies costing $2,500 on October 5.

Pioneer recorded the payment by increasing (debiting) the asset supplies. This account
shows a balance of $2,500 in the October 31 trial balance. An inventory count at the
close of business on October 31 reveals that $1,000 of supplies are still on hand.

‫ بعدها فـ أخر‬, asset ‫ عشان ه‬supplies by debiting ‫ بعدها زودوا الـ‬, $2500 ‫ بـ‬supplies ‫اشتت‬ ‫الشكة ر‬
‫ر‬
‫ و ده‬$1000 ‫ و لقوا انها بقت موجوده فقط بقيمة‬on hand ‫ الل موجوده عندهم‬supplies ‫الشهر عملوا جرد لل ـ‬
‫الل هيخليلنا كل حاجه‬
‫ و ي‬adjusting entry ‫ و هو ده دور الـ‬$1500 ‫ بقيمة‬supplies ‫معناه انه تم استخدام‬
: ‫ فـ هنحلها كالتال‬، up to date ‫متسجله‬

• Solution:

October 31 Supplies Expense 1.500

Supplies 1.500

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 FCES Students’ Council Financial Accounting - Chapter 3

❖ Depreciation
• Buildings, equipment, and motor vehicles (assets that provide service for many
years) are recorded as assets, rather than an expense, on the date acquired.

• Depreciation is the process of allocating the cost of an asset to expense over its
useful life.
• Depreciation does not attempt to report the actual change in the value of the asset.

‫ و طبعا استهالك أي حاجة بيأدي ي‬asset ‫• دا بيكون استهلك ال‬

‫ بيتسجل كـ‬depreciation ‫ الـ‬،‫ال نقصان تمنها‬
‫عن‬‫ن‬ ‫ن‬
‫ ي ي‬، asset ‫ عكس ال ـ‬account ‫يعن ال ـ‬
‫ ي‬، contra asset account ‫ ألنه اسمه‬expense ‫ مش كـ‬asset
.expense ‫ مش من‬asset ‫الل زيه من الـ‬
‫ ف بيتحسب مع ي‬asset ‫بينقص من الـ‬

‫ر‬
‫ أل الـ‬،‫ وال بيتسجل عل اساس سعره الحال‬،‫ ده‬asset ‫الحقيق للـ‬ ‫ مبيسجلش التغت‬depreciation ‫• الـ‬
‫ي‬
،‫ يعيش فيها‬asset ‫الشكة بتحددها للـ‬‫ و دى مدة ر‬useful life ‫ بيتسجل بتوزي ــع سعره عل ال ـ‬depreciation
‫ ف ـ بنقسم السعر عل عدد‬،‫ ده يقعدها معاها‬asset ‫الشكة متوقعة لل ـ‬ ‫تعتت مدة الصالحية الل ر‬
‫ه ر‬ ‫ن‬
‫ي‬ ‫بمعن اسهل ي‬
‫ي‬
.‫ كل شهر‬asset ‫الل بنقصه من الـ‬ ‫ر‬
‫ ي‬depreciation ‫الشهور و الرقم الل بيطلع بيبق هو ده ال ـ‬
NB: allocation concept, not a valuation concept.
.‫ بتاع التقييم حاجه تانيه‬concept ‫ بتاع تخصيص السعر حاجه و الـ‬concept ‫الـ‬

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 FCES Students’ Council Financial Accounting - Chapter 3

• For example: for pioneer advertising, assume that depreciation on the equipment is
$480 a year,
• Solution: we will divide the 480 over the months of the year to get the monthly
amount of depreciation 480/12=40

Oct. 31 Depreciation expense 40

Accumulated depreciation 40

Terminology: accumulated depreciation is called a contra asset account (credit).

Book value is the difference between the cost of any depreciable asset and its
accumulated depreciation.
‫ ن‬،accumulated dep. ‫ و ال ـ‬asset ‫ سعر ال ـ‬difference between ‫ هو الـ‬book value ‫الـ‬
‫يعن تعمل سعره‬
.‫ بتاعه‬book value ‫ الل حصله يطلعلك الـ‬depreciation ‫ناقص الـ‬

Summary of the accounting for prepaid expenses

• Unearned revenues
o Rent
o Airline tickets
o Magazine subscriptions
o Customer deposits

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 FCES Students’ Council Financial Accounting - Chapter 3

Revenue
Cash Receipt Before
Recorded
• Receipt of cash that is recorded as a liability because the service has not been performed.

• Adjusting entry is made to record the revenue for services performed during the period
and to show the liability that remains at the end of the period.
• Results in a decrease (debit) to a liability account and an increase (credit) to a revenue
account.
.liability ‫ فـ بتتسجل‬, ‫ المطلوبة منك‬service ‫ بس لسه معملتش الـ‬cash ‫• و دي لما يوصلك‬
‫ ي‬service ‫ هنا بيتعمل كل ما بتعمل جزء من الـ‬adjusting ‫• الـ‬
.‫الل عليك‬

.credit ‫ بال ـ‬revenue ‫ و نزود الـ‬debit ‫ ألننا عملنا جزء منها بال ـ‬liability ‫بـ تتم باننا نقلل الـ‬

• For example: pioneer advertising received $1,200 on October 2 from r. Knox for
advertising services expected to be completed by December 31. Unearned service revenue
shows a balance of $1,200 in the October 31 trial balance. Analysis reveals that the
company performed $400 of services in October.
‫ من اللى‬service ‫ و فـ اكتوبر اتضح ان الشركة ادت‬service ‫شركة تسويق واعالن خدت فلوس مقدم عشان تعمل‬
:‫ يبقي هتتحل كـالتالى‬, $ 400 ‫عليها ب‬
Solution:
Oct. 31 Unearned service Revenue 400
Service Revenue 400

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 FCES Students’ Council Financial Accounting - Chapter 3

Summary of the accounting for unearned revenues.

Ex. The ledger of Hammond Company, on March 31, 2017, includes these
Selected accounts before adjusting entries are prepared.
Debit Credit
Prepaid Insurance $ 3,600
Supplies 2,800
Equipment 25,000
Accumulated Depreciation—Equipment $5,000
Unearned Service Revenue 9,200
An analysis of the accounts shows the following:
1. Insurance expires at the rate of $100 per month.
2. Supplies on hand total $800.
3. The equipment depreciates $200 a month.
4. During March, services were performed for one-half of the unearned
Service revenue.
- Prepare the adjusting entries for the month of March.
1. Insurance expires at the rate of $100 per month.
Insurance Expense 100
Prepaid Insurance 100

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 FCES Students’ Council Financial Accounting - Chapter 3

2. Supplies on hand total $800.

Supplies Expense 2,000
Supplies 2,000
3. The equipment depreciates $200 a month.
Depreciation Expense 200
Accumulated Depreciation—Equipment 200
4. During March, services were performed for one-half of the unearned
service revenue.
Unearned Service Revenue 4,600
Service Revenue 4,600
***
• Accruals are made to record
1. Revenues for services performed but not yet recorded at the statement date.
1. Revenues for services performed but not yet recorded at the statement date.
2. Expenses incurred but not yet paid or recorded at the statement date.
‫ن‬
expense ‫ ولما تستفيد ب‬,‫بس لسه مخدتش فلوسك‬service ‫يعن لما تعمل‬
‫زي ما قلنا قبل كده دى المؤجالت ي‬
.‫بس بردو لسه مدفعتش فلوسه‬

Revenue Recorded Before Cash Receipt

• Accrued revenues are a revenue for services performed but not yet received in cash or
recorded.

Rent

Accrued
revenue
Service Interest

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 FCES Students’ Council Financial Accounting - Chapter 3

• Adjusting entry shows the receivable that exists and records the revenues for services
performed
• Increases (debits) an asset account.
• Increases (credits) a revenue account.
‫ن‬
‫ و‬asset ‫ ال ـ‬debit ‫يعن‬ ‫رن‬
‫ ي‬cash ‫ انت عملتها ف ـ بتود الـ‬service ‫هنا التحديث بيحصل لما بتستقبل فلوسك عن‬
.credit ‫الل ه اصال‬ ‫رن‬
‫ ي‬revenue ‫هتود الـ‬

• For example: in October pioneer advertising performed services worth $200 that were
not billed to clients on or before October 31.
• Solution:
Oct. 31 Accounts Receivable 200
Service Revenue 200

• On November 10, pioneer receives cash of $200 for the services performed.

Nov. 10 Cash 200

Accounts Receivable 200
Summary of the accounting for accrued revenues

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 FCES Students’ Council Financial Accounting - Chapter 3

• Accrued expenses are an expense incurred but not yet paid in cash or recorded.

Expense
Before Cash Payment
Recorded

Interest

Salaries
Accrued Rent
expenses

Taxes

• Adjusting entry records the obligation and recognizes the expense.

• Adjusting entry:
o Increase (debit) an expense account.
o Increase (credit) a liability account.
‫ فـبالتال ن ن‬،‫الضايب و الفوائد‬
‫بتود‬ ‫لشكة مستحقات زي االيجار و المرتبات و ن‬
‫بيبق فيه عل ر‬ ‫بتبق مثال اول كل شهر ر‬ ‫دي ر‬
‫ر‬
. ‫ علينا‬liability ‫هتبق‬ ‫ ف‬،‫ ألننا لسه مدفعناهاش‬liability ‫ و نزود الـ‬debit ‫ بال ـ‬expense ‫ال‬

• Here is an example for the accrued interest: pioneer advertising signed a three-
month note payable in the amount of $5,000 on October 1, the note requires
pioneer to pay interest at an annual rate of 12%.

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 FCES Students’ Council Financial Accounting - Chapter 3

✓ Solution: to get the monthly interest we do it as follow

Oct. 31 Interest expense 50

Interest payable 50

Summary of the accounting for accrued expenses.

Summary of basic relationships

, unearned revenue ‫ كـ مثال ان ال ـ‬, ‫الل المفروض ه عليه حاليا‬ ‫ن‬ ‫ن‬
‫ يعن قيمتها زيادة عن ي‬overstated ‫هنا معن‬
‫ ألن ر‬overstated ‫ هنا‬liability ‫الـ‬
‫ ن‬, ‫الشكة عملت جزء من الل عليها‬
‫ ف ـ بقت عل‬, ‫ قلت‬liability ‫معن كده ان الـ‬
.up to date ‫ عشان نخليها‬adjusting ‫ فـ بنعمل ليها‬overstated ‫الورق‬

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 FCES Students’ Council Financial Accounting - Chapter 3

• Adjusted trial balance

o Prepared after all adjusting entries are journalized and posted.
o Purpose is to prove the equality of debit balances and credit balances in the ledger.
o Is the primary basis for the preparation of financial statements.

posting ‫ و ال ـ‬journalizing ‫ بنعمله بعد ما بنعمل كل التعديالت عل الـ‬adjusted trial balance ‫ال ـ‬
. ledger ‫ نف الـ‬credit ‫ و الـ‬debit ‫بي الـ‬
‫بنعمله عشان نتأكد من التساوي ن‬

. financial statements ‫الل بيتعمل منه كل ال ـ‬

‫ حجر االساس ي‬adjusted trial balance ‫يعتت الـ‬
‫ر‬

Preparing financial statements

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 FCES Students’ Council Financial Accounting - Chapter 3

‫ و ال ـ‬income statement ‫ المعلومات الكافيه الل تخلينا نعمل ال ـ‬adjusted trial balance ‫احنا هناخد من ال ـ‬
. balance sheet ‫ عشان ف األخر نطلع منهم ال‬Owner’s Equity

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 FCES Students’ Council Financial Accounting - Chapter 3

Question: Which of the following statements is incorrect concerning the adjusted trial
balance?
a. An adjusted trial balance proves the equality of the total debit balances and the total
credit balances in the ledger after all adjustments are made.
b. The adjusted trial balance provides the primary basis for the preparation of financial
statements.
c. The adjusted trial balance lists the account balances segregated by assets and
liabilities.
d. The adjusted trial balance is prepared after the adjusting entries have been journalized
and posted.

- Alternate Treatment for Adjusting Entries

1. When a company prepays an expense, it debits that amount to an expense account.
2. When it receives payment for future services, it credits the amount to a revenue
account.

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 FCES Students’ Council Financial Accounting - Chapter 3

‫ ر ن‬،‫يعن قبل ما تستهلكها اصال‬

‫ بتاع الـ‬debit ‫بتود بيها الـ ـ‬ ‫ن‬ ‫ر‬
‫ ي‬،‫ مسبقا‬expense ‫هنا بيقول ان الشكة لو دفعت فلوس الـ‬
.expense
‫ فـ ه ر ن‬،‫ قبل ما تعمله‬service ‫الشكة استلمت تمن الـ‬
. revenue ‫ بتاع الـ‬credit ‫بتود ال ـ‬ ‫و لو ر‬

- Prepaid Expenses:
• Company may choose to debit (increase) an expense account rather than an asset
account. This alternative treatment is simply more convenient.
‫ ر‬expenses by debit ‫لشكة بتختار انها تزود ال ـ‬
‫ ألنها بعد ما بتستخدمه بتحطه فـ الـ‬asset‫اكت من انها تزوده ف ـ الـ‬ ‫ا ر‬
.(asset) ‫الشكة مستخدمتوش‬ ‫ لما كان لسه ر‬prepaid expense ‫ بعد ما كان ف الـ‬expenses account

• Unearned Revenues:
• Company may credit (increase) a revenue account when they receive cash for future
services.

.‫الل لسه هتتعمل‬ ‫رن‬ ‫ر‬

‫ ي‬service ‫ لما بتاخد فلوس ال ـ‬revenues by credit ‫الشكة بتود ال ـ‬

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 FCES Students’ Council Financial Accounting - Chapter 3

Summary for additional adjustments relationships

❖ Qualities of useful information:

• Two fundamental qualities, relevance and faithful representation.

Relevance:
1. Make a difference in a business decision.
2. Provides information that has predictive value and confirmatory value.

‫بالل‬ ‫ر‬
‫الل بتأثر عل قرارت الشكة و بـ تتيح المعلومات الل عندها قدرة التنبوء ي‬
‫ دى ه المعلومات ي‬relevance ‫الـ‬
. ‫ممكن ريتتب عل القرارات دي ن يف المستقبل‬
Materiality is a company-specific aspect of relevance.
An item is material when its size makes it likely to influence the decision of an investor or
creditor.
‫يعتت‬
‫شء ر‬ ‫ر‬ ‫ر‬
‫ وان اى ي‬, ‫الل بتساعد عل التأثت فـ القرارات بتاعت الشكة‬
‫ ه الحاجه ي‬materiality ‫ الـ‬, ‫زى ما قلنا فوق‬
. creditor ‫ لما حجم اهميته يبدأ يأثر عل قرارات المستثمر او الـ‬material
Faithful Representation:
1. Information accurately depicts what really happened.
2. Information must be: Complete (nothing important has been omitted

Neutral (is not biased toward one position or another), Free from error.
‫ و المعلومات دي الزم تكون‬, ‫ ه معلومات مكونة من ارقام و اوصاف حصلت واقعيا‬faithful representation ‫الـ‬
‫ن‬ ‫ر‬
‫معي ( مفيهاش انحياز) خالية من الخلل و‬ ‫شء محايده مبتتجهش لحاجه معينه او لشخص‬ ‫ كاملة لم يحذف منها ي‬:
.‫المشاكل‬

- Enhancing Quality: ‫ن‬

‫تحسي جودة العمل من خالل‬ ‫هيتم‬

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 FCES Students’ Council Financial Accounting - Chapter 3

1. Comparability results when different companies use the same accounting principles.
2. Information is verifiable if independent observers, using the same methods, obtain
similar results.
3. Information has the quality of understandability if it is presented in a clear and concise
fashion
4. Consistency means that a company uses the same accounting principles and methods
from year to year.
5. For accounting information to have relevance, it must be timely.

.‫حسان واحد‬ ‫نان اقدر اقارن نتائج مدى نجاح او فشل ر‬

‫الشكات المختلفة لما كلهم يستخدموا نظام‬
‫ري‬ ‫ي‬
‫للشكات) يستخدموا‬‫الماليي (الل بيصححوا االخطاء المالية ر‬
‫ن‬ ‫ن‬
‫المدققي‬ ‫و ان المعلومات دى ر‬
‫بتبق موثوقه لما‬
‫ي‬
.‫طريقتهم عشان يطلعوا نفس النتائج زى بعض‬
.‫و ان المعلومات بتكون مفهومة و لما بتتكتب بطريقة واضحة و مختضة‬
.‫الشكة تستخدم نفس اساليب المحاسبه من سنة للتانية زي بعض‬ ‫ معناها ان ر‬consistency ‫و الـ‬
‫و نف األخر الزم المعلومات المحاسبيه دى تكون ليها عالقة بالقرارات الل ر‬
‫ عشان كده الزم تطلع فـ‬, ‫الشكة بتاخدها‬ ‫ي‬ ‫ي‬
.‫وقتها المناسب‬

End of Chapter 3, Good Luck

And here is a little training to test yourself.
https://www.classmarker.com/online-test/start/?quiz=43p5fc528cf76421

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