(CASH AND ACCRUAL BASIS / SINGLE ENTRY ‘cash Vs, Accrual Method of Accounting ie ie Tr Revenue recogire inthe period tat revenve war ‘eivered othe cusomer bt another Pris 2. Expense is fecogned ne ered tat éxpense was isbureed in cash even W te bereft Used UD st feo concep the realization and le Revene tvecopnzed nthe perio ts earned without Feoarat te time of rece ot ean [pence ls recognised i the perod ft Is Incurred nother pevoa vata regard to the tne of peyinent ofeach 3. MOL” ERS “because the realization and the Net come provides reais frm profeabity for eS ee aad 2 ate time par, ‘sce both revert and exeree ‘Sperating ecto that caused them occured ‘cash baie ‘Accrual base Sale ‘Cash sales pis colton of Wade | Cash sales pus sales on account. Purchases ‘Cec purchases pur payment t Wade | Cash purchote lus purchases on Sune Tome other than | AroutsTaSved re cOTaGarad as | Roun GREG 38 Canaan CATE FTES oF WET | sales Income egal of wh a Expenses, in general | Amounts pas are roses ss expenses kmountsIncured ore Wested ar expanansregaalorso when trade recabes are not recognize, Sookkesoing isthe systematic and cronolugial recording o wansactions and events Books of accounts. It 16350 Frown 95 the recording phase of ecountng, Purpose: Sse or determining fnacil postion and operating resus ‘system of Bookkeeping TT Double entry bookkeeping - 2 system of bookkeeping which views transaction as having twovfl effect on accountng (ues, (a vale eceved ar a value parted wih and wan elects these two fl ffs in the accountng pred) + Single entry Bookkeeping - a system of toskueeping whereby, se 8 genera fue only cash end personel serous ae Fecognized oy. system of recording transactions: inciples | Transactions | Accounts [Books ‘nancial statement Involved” | and. events presentation x Pas {|i Guaity —[Recores every | sas, Tura specu’ | Fanci satenenis ae Double | transaction |2: Eavalty | toe | Uacttes, | Journal Ledper, | prevared using a ystomatc sentry | Spore) esunabie | Equity income | Subsalary” | processing data known as erent fan Bipenses | ager” ana | he accouting "process Stner Important | Income (oar) fe computes foes {Sig Sect ating ‘Single | Nat PFRS |S. Recognized [Records ony | cach, Recounts | Cash Books, and [Income ees) and Seer | (cata | Say one | tenanetons °"” | Racatabie | Supeaiery” "| statement of esse and Imaintenance | phase ot | invatng cash and | Aecoures” | Leoper ities ts prepred using Seer) | reweon | peso accu | Peale, and (pron |e ana ere ‘method ‘Computauon of sis, purchase, expanses at incre otha Tan Sie Und aah Basi, hd wee ‘CASH/ACCRUAL AND SINGLE ENTRY nerease in Accounta/ Notes Receivable - trade, means there were more sole on account than collection (thus, At the onset tah sito ge the sceve alates or Deduct he cease no te ocrual bas to ge the cash bel aes). b.becreace in Accounts/Notes Receivable - ‘ro, means that there mare more calleton that is on account (this As the Secreae tothe actual bass to gt cash tats sales of Gade te decrease om the cath bass to get the ecual Bass Sls) ‘ctncrease in Accounts/Notes Payable - trade, means that there were more pureases on account han payment to suppl {Gus Aa te nerease to the cas bass purchases (poyments made) to get the acral bass purchases or Dede he merece orn {the acu ess purchses to get the cash base pura) ‘Decrease m account note Payale— as, eans at wee repay sis cash bas putas) an made oc Dedut the decreaue fom the cash bans purehsass to et the octal bass purses Paget ofs{ uang refunded sles urn to cstomes ‘eluding (edad purchase ‘arts Won Supple® *tntuea Inthe analysis onl If coletons Includes te sa ecovery vonored notes: nt pai as of matuty date transfer to acount recehable (Fae vale ofthe note + interest + protest fe) For CASH ~ ACCRUAL PROBLEMS related to item of Income and expenses (@.. rental income and expense, royalty Income and expense and ether similar items) ‘Accrued income/Unearned income ‘Prepaid expense / Accrued expense Beg. Balance (unearned eg. Ba (ace neome) incane) Beg. Balance (reps exp) | eo, Balance (accrued exp) Collection of cash (cash Payment of cash (cash Recognize income (accrual baste) Recognize Expense (accrual basis) asia) basis) Eng Blane ( ecrucd Fd Bal. (Uneatred come) _| End Ba. (Ac, Income) sree) Fg Balance (repel exp) Teter te prion dates Inerease or decrease Whe Telsfed balance toot acaunts, Petead Of te Bapinning 95d OnaS ‘atanees, simpy place m the bepnnng bance Its net decrease (hee ths nates that tbe bepnang Is hgher than enang ‘olsnee) or place te ending Balance Is net increase (ance ts nastes tha ending balance = ghar than the BegMIng “Tatereatincome/ expense (with amortization of discount oF premium) ash pat or erst xxx | IMerest expense = Smorteaton of dszount on bonds payable ‘cor | Amostzotin 0 premium on bonds payable i {Interest recelvable and amortization of bonds (it applicable) Bo. a ‘retain of premium on bond investment ‘rr | Amortznton of ascot on bond investment 0 Ena ea Depreciation expense: Besiaing ‘or | ends Toor feistn 2a: | Beoecaton xo Bad debt expense ( Sina entry formula fr nat income ‘Cash ana Accrual Basis and Single Entry-Bateh May 2020,7 EGURY ending minus eUyDagllngeauals net Wren or GRCTRGE To aU plus René deducted Wom aquy Bi noe ote or loss (avisend, wthsrawal, eros) minus Rams added to ext but hot proft or toss (sue of Share cata Eadional investment donated engi errs) equate Ne neame O85 ‘What isthe “single entry formula” in determining net income or loss? The procedure n determining net income of ls imply to compare the captor retained eaming a the Beinnng ofthe Year and capa o retained earings a the ena ofthe sve yea, ater taking Ito consicerstion Wiheranas or aaah an {eahionl investments, The ifference i tne et Income ov net lose sy increase In capital or retained earnings is net Income ard any decrease In captl or retained earings net los. The Single entry formula af tering net Incame or tos Is asa known “net sass approach” "caplal mastenece TE capa ena of year om fetincame Gos) o Formula for corporation: Ds Ontderde dedored o pala = ‘Ser tems that decreaee retained eorings but ot elude npr or loss a TESS! Retained earings, begining = ‘Shar tama tha inteae ana exings ut ot nlued profit ores a et income os) o 1 the alone of retained earings snot avlble, the nt income oles maybe determine 95 fll! “Shrenors equity “ene or ‘ae: Dvn declared or paid = Starts at eceae ey Ou at nce poo ss = ‘ther mane at soar egy Bu Nt nad in prof ras fetincme oss). = [REVIEW QUESTIONS T, (Acerwal Basis) Sais salaries pid during ZOri were P0000, Aavarcs fo solemian were PI100 on January 7, 2Oxi, and Piod on Decomber 31, 20c1 Sles slates acrued were 1,360 of analy 1, 20x, and 2,380 on December 31,304. show the Computation 0! sles sles onan 3ctrval ba for 204 2. (Accrual Basis) The ecoas for Todd Ine stowed the flowing fr 2011 "i osc. Cash pl daring the year for expenses, 2,500 ine omptstn ofthe arnt expe to sald be eaten the cae statement 3 (Accrual Basis) The recoas for Key Company showed the otowing fo 20%: Desrue revenve 1360 ‘530 Cash caneced during the year for revenue, F70,000 Showin camps te amount teenie ta shad eeprom the ene een ‘4. (cash Basis) Revenue onthe income statement was P125,800. Accounts recelvable Wer P00 on January 4 and 3,540 on December 3 Unesned revenue nam P1050 an anusty 1 an P70 on Decebar 3 Show the computetion af rverue for he Yea ona aah Boas ‘Cash and Accrual Wasis and Single Enty-Bateh May 20205. (Single entry) changes in the accounts of Noe Co, fr 20x6 area flo Tnerease / (Decrease) aa al Recon TE 500,00) ‘lance Yor Bad 6B as0.000) | Merchandise vent $500,000] Trvestment ingest $00,000] Proper. plant and eauipmant 2.40,000] ‘Accarulted depreciation 500,000] ates payable 500,000 | Bonds payable 2,800,001 acount on bonds payable 00,000 Revalustion sur 3,500,000 | Treasry shares 320,000) + On December 31, 20x6, Neel Co. dedared cash cvends amounting to P500,009 and share didenés amounting to 800,000" Aso uring the year the company appropriate Feta earings fr the retement of bons ameurting to 0000. “+ During the year, Noe obtaines a bank oan of £2,000,000 and pal of tan amortization of P,600,000 and interest of 100,000~ Interest of P180,000 accrued on December 31,206. There was Mo nares payable a the end of 2015. Ih 0x6, Noel Company aequitedtressiry seres om fs existing shareholders. ‘Compute or he nt oss uring the year Problem 6: (Comprehensive Problem) An anayls of complete records of Laban Corporation produced the folowing Infermatn age t 20:1 counts racahabs 400,000 Tnventary Tapa Boe Eaupment 100,000 “summary of cash transactions were as fellows ‘ah purhaaes| 0000 insurance 700.000 [tno 00,000 Dis 200.000 ‘Additional information: Toa sles returns an allowances amounted 1,200,003, Required: Determine the acted balances ofthe fotowng Ther sales P17 b00.000 8. 17.00.00, Pu7.700,000 . #17,000.000 3. costot sates 2 risoo'o0e 8. 10,700,000 ©. 8,400,000 ©. #19,900,000 A PiB000 "a. pa00,000 00,000 ©. 3.000.000 Psto0.000 8. 5,200,000 &.5.180,000 ©. 5,900,000, ‘Cash and Accrual Wasis and Single Enty-Bateh May 20202 nent reported sales revenue of P,600,000 In the income statement or he curent yer danuary + a lanes for doubtful account e000 ‘000 ‘vances fom customers 200,000 300,000) ‘The ensty wrote off uncolctbe accours totaling P50,000 during te curent year. Under eash basi, what amunt should be ‘ported or sles revenue forthe curren year? pa 900,000, 8. Ps.250/00 4,350,000 1. pa,400,000 ‘AR, bea 1,000,000 1,300,000 AR, end “ 4,350,000 _ Collection Sa ‘Alowance for doubt Water 30.000 oo!oo0_ BOE 2. uring te currant yaar, an enty reported gross cash sles of 3,000,000 wh clas retuns and allowances ot P400,000 ana gross cre aes of P5000,00 eh relates aecount of 400,000. On January 1, customers owed the erty P,000,000 ane Sabie were recorded In ve erent Year.”Undereash basi, what amount of sles reven shout be reported forthe cUrent AR, bea 1,000,000 1,500,000. AR, end Sales on account 500,000, 00,000 Sales elscount 4,300,000 Callection Collection 4,100,000 Returns and allowances 109,000 nian = seal Oana eee Ze. 00 Use the following information forthe next two (2) questions: January December 3 During the current year, accounts writin off amounted tn 00,000, Sales returns ttle 250,000, of whch P50,000 was pal to istomars. Purchase fetus amu t0 P4000, of whch 100,000 wes fecaved rom supohers’ Cash ecits Wom customers ‘ster 500,000 dicount totale 9,006,000 une’ enan payments to wade creditors akeraleouns oF 208,00 amounted To 3. Whats the amount of goes eles under acu! bas? 4 whats the amount of gross purchases under accrual bass? 3"p5 280,000, 6. P5,950,000 . 5,400,000 ©, 5,850,000 AR bea 1,200,000 | 1,350,000 AR, end Sales on account 18,950,000 200,000 Soles return 18,000,000. Catecton Soaloog Sales discount me a 20, ed 1,850,000 1,500,000 AP, bea Purchase discount 200,000 8,880,000 Purchases on account Porehose return 00.000 sao rasa 5 Ouring te current year, the enty paid suppers 4.90000 and reports the folowing Blancs: hat amount shows be reported as cost of goods Sold the Income statement or Curent Year? ‘Cash and Accrual Wasis and Single Entry-Bateh May 2020, Pages:Inventory, bea 2,900,000 | __2,600,000 Inventory end 90, end! 730,000 500,000 AP, bea 0.0 50.00 6. An any borowed money under vious lan agreement Invalvng nates requting Intret payments a rmaturty. uring the ‘rant yar, the enty pad interes otsing 000,000. Te sateen of franca poston ineuded the flowing hot amount of interest expense shouldbe reperted forthe current year? PI, bea 500,000 1,500,000. PI, end Berd 2,500,000 2/000,000 1, bea [Amortization bond discount “Amortzaton bond premium Innorest pd 00 0 ‘niereatincome7 expense (with amortization of dscount oF premium) {Interest payable and amortization of bonds (if applicable) es. a sn pals or interest vnx | Tterest expense = En eal _ terest recaivable and amortization of bonds (it applicable) meitzation of premium on bond investment Xr | Amortization faacount on bo investment eo Inara neome xr | Cau recewed tor itorost i 7. Anenty asigns Some of ts patents to ether enstes under a vanty of lensing agreements, The olowing data ave gather forte curt 99 During the current esr, the entty received royalty remittance of 2,000,000, What amount shou be reported as royalty Rovalts recevable, bea 300,000 '850,000 Rovalesrecalvabl, Bovalty i 2.150.000, {000.000 _calecton s a '8. An enty mamcans the accunting records onthe cash nals but restates the Mant statements to the accrual bass. The raced Incnen inet oe ncome forthe ce "he ent prone te flown norma January + Dacomber 31] Under scr bet, what amount shoul be reported a et Income fr curent yea? Net income, accrual basis 9,500,000 19,500,000 Bhs bea 21006,000 ‘AR. end (£000,000) tnerease AR (2.000.000), BP, bea (Si000,000), Decrease AP (’s00,000), Pend 1.30 hati a 18. An entty maintains ts books on s cash bass. Dung the curent year, the erty collected 50,000,000 rom customers an ats 2,000,000 expenses. ‘Cash ana Accrual Basis and Single Enty-Bateh May 2020 Pages:Breall expenses 00,000: “oo,000 vanes om Besrues expenses 3,000,00 ‘00.000 ‘Accourts paysbe 7,400,000, 7,300,000 [Depreciation or carrent yaar 2,580,600, 8. s,000,000 . 8,000,000 ©. 67,500,000 ‘AR, bea 72,000,000 » Decrease, AR 300,000, ‘AR, end 2'700,000) PE, bea 200,000 PE, end (00,000), Increase, Prepaid (100,000) ‘Adv trom customer, bea (00,000) ‘Accrued expenses, beg (4,000,000), Decrease, Accruce (200,000), ‘ecrued expences, end 300,000 ‘counts payable, Bea (4,400,000) payable end 21500"D00" Increase AP Li ‘Ctincome ‘cash base s.oo9.000 ta) c ‘SINGLE ENTRY J 000,000 vised payment the you's earings and «£200,000 por prid errr tom understatement of ending ‘were n ther canons in retained emnge forthe yer. "Wha the net come forthe current Year? "pa, 0.000, 18 'P2 300,000 'b2.700/000 ."Poa00;000 Assets atin ¢ capital " “s00,000 2,200,000 11, An ently ceported shorehoier’ equity of Pe,00,000 on December 31. The ety revealed the folowing transactions during ‘The share capital tance of 5,000,000 remained unchanged during the year: What 5 the balance of retained earings on Saouary 12 SHE, December 31 8,000,000 Less Shore capa (6.000.000), ‘hess. Shae premium ts sooo) ‘Bewunedcainis, December Sy aoa. RE, January 1,300,000 Prior peried sdustment (300,000) Net ncome 3,000,000 ‘TRE December gy 12; nent revealed the following changes inthe accounts fo the cunt ‘Cash and Accrual Wasis and Single Enty-Bateh May 2020T.SDOaoDL Bonds payable 7%;900,800) Cees aaron $00,000 ‘uring te erent year, the ety issued 10,000 rcnary shares of P100 par value for P150 per share. Otvden of P,000,000 ‘toe Dald in caoh dung re year Eauient ith or valve of 500,000 was donated by a sharahader dig te Ye ‘he enty borrowed 3,000,000 fom the Bank and made interest payment of 200,000, ‘The bank loan unpa!at year-end hd the terest payable a year-end wes P1000, There nointerea payable atthe Boglning ot Year Assets Lablities ¢ capital Tp 2,000,000, " 1,500,000 * 3,000,000 100,000 “590,000 4,000,000, 900,000 St coco ‘Cash and Accrual Wasis and Single Enty-Bateh May 2020