Adjusting Data (Cheat Sheet) Prepaid Rent 50 000

1. ACCRUED EXPENSE- Expense incurred but not yet paid (ikaw mag Cash 50 000
babayad ng interest) Adjustment (USED PART):
 Interest Accrued on Notes Payable Rent Expense 29 167
 Accrued Salaries of Employees Prepaid Rent 29 167
Journal Entry: (50 000 x 7/12= 29 167)
Expense XXX
Payable XXX EXPENSE METHOD
Example: Upon Payment:
May note na outstanding Dec 2019 worth 10 000 tapos yung interest Rent Expense 50 000
makukuha sa date of maturity which is after 1 year 15% ang rate edi Cash 50 000
may interest na ma aacrue sa Dec 2019 for 1 month so record mo yon. Adjustment (UNUSED PART):
Interest Expense 125 Prepaid Rent 20 833
Interest Payable 125 Rent Expense 20 833
(10 000 x 15% x 1/12= 125) (50 000 x 5/12= 20 833)

2. ACCRUED INCOME- Income earned but not yet received or 4. UNEARNED INCOME- Income collected but not yet earned. (Ikaw
collected (Sila magbabayad ng interest sayo) nag bigay ng load) (Ikaw nag paparenta)
 Accrued interest on notes receivable  Rental Income
Journal Entry:  Subscriptions Received in advance
Receivable XXX
Income XXX Two methods ng pag recognize:
Example: LIABILITY METHOD- Collection is initially credited to LIABILITY account;
May note ka na inissue so May income ka mula sa interest nung not na the EARNED portion is transferred to income account.
yon. Pag inissue mo sya nang Dec 2019 at ang maturity ay next year Initial collection:
pa, edi may income ka na makukuha sa end of reporting period which Cash XXX
is Dec 31 2019 so need irecognize. Unearned Income XXX
Interest Receivable 125 Adjustment:
Interest Income 125 Unearned Income XXX
Income XXX
3. PREPAID EXPENSE- Expense paid or acquired in advance (Parang
load lang to) (Ikaw nag pa load) INCOME METHOD- Collection is initially credited to an INCOME
 Prepaid Rent account; the UNEARNED portion is transferred to liability account.
 Paid in advance office supplies Initial collection:
Cash XXX
Two methods ng pag recognize: Income XXX
ASSET METHOD- Payment is DEBIT initially; at the end of reporting Adjustment:
period the USED portion is transferred to expense account. Income XXX
Initial payment of expense: Unearned Income XXX
Prepaid Expense XXX
Cash XXX Example:
Adjustment: Nagparenta ka nag bayad na sila sayo ng 150 000 for 1 year nag simula
Expense XXX sila ng March 1, 2019. Ang nagamit na nila ay 10 months.
Prepaid Expense XXX
LIABILITY METHOD (USED PART)
EXPENSE METHOD- Purchase in initially recorded at and EXPENSE Initial collection:
account; at the end of the reporting period the UNUSED portion is Cash 150 000
transferred to asset account. Unearned Rent 150 000
Initial Payment of expense: Adjustment:
Expense XXX Unearned Rent 125 000
Cash XXX Rent Income 125 000
Adjustment (150 000 x 10/12= 125 000)
Prepaid Expense XXX
Expense XXX INCOME METHOD (UNUSED PART)
Cash 150 000
Example: Rent Income 150 000
Rent nagbayad ka na advance for 1 year 50 000 nung june 1 2019. End Adjustment:
ng reporting period ay Dec 2019. So irecognize yung 7 months na Rent Income 25 000
nagamit na sa rent mo. Unearned Rent 25 000
(150 000 x 2/12= 25 000)
ASSET METHOD
Upon Payment:
5. DEPRECIATION OF PPE AND OTHER COST ALLOCATION- CLOSING ENTRIES
Systematic allocation of depreciable amount of a ppe. 1. Closing the balances of revenue accounts to income summary
Journal Entry: 2. Closing the balance of expense accounts to income summary
Depreciation Expense XXX 3. Closing the balance of income summary to retained earnings
Accumulated Depreciation XXX Profit (Income Summary has a credit balance)

Example: Income Summary XXX

Bumili ka PPE worth 120 000. Residual Value 20 000. Useful life 5 Retained Earnings XXX
years.
Situation 1: Nabili mo Jan 1 2019. Loss (Income summary has a debit balance)
Dec 31 2019
Depreciation Expense 20 000 Retained Earnings XXX
Accumulated Depreciation 20 000 Income Summary XXX
(120 000-20 000) / 5= 20 000

Situation 2: Nabili mo July 1,2019

Dec 31, 2019
Depreciation Expense 10 000
Accumulated Depreciation 10 000
(120 000-20000)/5 x (6/12)= 10 000

6. UNCOLLECTIBLE ACCOUNTSD- Account no longer collected. BAD

DEBTS
Shall be recorded at AMORTIZED COST.
Journal Entry:
Uncollectible Account Expense XXX
Allowance for Uncollectible Accounts XXX

Required Allowance Balance XXX

Allowance Balance Before Adjustment (XXX)
Uncollectible Account Expense XXX

Example:
Entity reported
AR 1 000 000
Allowance for bad AR 2 000
Estimated Uncollected AR 12 000

Uncollectible Accounts Expense 10 000

Allowance for Uncollectible Accounts 10 000
(12 000-2 000= 10 000)

7. INVENTORY- Necessary if periodic system is used. Under periodic

system, the company does not record the physical movements of
goods.
Journal Entry:
To transfer beg inv to income summary:
Income Summary XXX
Inventory (Merchandise Inv) XXX
To record ending inv balance
Inventory (Merchandise Inv) XXX
Income Summary XXX

Adjustment:
Inventory, end XXX
Purchase return and allowances XXX
Purchase Discounts XXX
Cost of goods sold XXX
Inventory, beg XXX
Purchases XXX
Freight-In XXX