THE ADJUSTING ENTRIES b.
Liability accounts might include income
What is Adjusting Entries?
 Adjusting Entries are journal entries usually
prepared at the end of the accounting
period to update the records in order to
present fair and more accurate financial
record.
 This is done for the trial balance that you
made is no longer updated.
 In Adjusting Entries, a General Journal is
prepared which is now entitled “Adjusting
Entries.”
Accounting Period
 Any period in the life of the business where
financial reports are prepared.
Reasons of the Need for Adjusting Entries:
Adjustment of books must be undertaken because
there are “Hidden Transactions.”
Hidden Transaction are transactions which are not
yet recorded during the accounting period. The
following items need to be adjusted at the end of
the accounting period:
a. Asset accounts might include expired cost;
already earned;
c. Additional Income or expense may not be
recorded yet; and
d. Recorded Income or Expense might include
amounts not belonging to the current
period.
Two Methods of Accounting
 Cash Method
- Used if income is recorded only when
cash is received and expense is
considered incurred only when paid in
cash.
 Accrual Method
- Used if income is recorded when goods
are delivered or services are rendered
whether paid in cash or not; and
expenses are recorded at the time they
are incurred even if not yet paid for.
- Accrual Method is used by most
businesses because it gives an accurate
result of most of its operations.
The accounts that need Adjustments
1. Adjustment for the provision for bad debts
2. Adjustment for the expiration for prepaid
expenses
3. Adjustment for unrecorded expense or
accrued expense
4. Adjustment for unrecorded expense or
accrued income
5. Adjustment for the depreciation of the fixed
assets
6. Adjustment for precollected income
7. Setting up the ending inventory (for
supplies, materials, merchandise)
Example of Unadjusted Trial Balance to be used as Journalizing- Adjusting Entries:
an example for the whole lesson:

Posting- Journal Entries:

 Bad Debts or Doubtful Accounts

The accounts refer to the portion of the receivable

which may prove to be uncollectible.
It is a normal business practice to provide an
allowance for bad debts. Some reason for this
2. Direct Write-Off Method (Exact Amount)
collectible may be due to poor collection, financial
means of the costumers, death, poor service, etc. - The amount directly deducted from the
receivable that is proven to be
Methods of Computing Bad Debts
uncollectible.
1. Allowance Method (uses percentage):
Example:
a. A certain percentage of the receivable
P500 of the Accounts Receivable is proven to be
b. A certain percentage of Income
uncollected.
c. Aging of the Receivables
d. Arbitrary Amount- any amount desired by
the business based on studies.
Example:
The estimated bad debts is 5% of the Accounts
Receivable.

Journalizing- Adjusting Entries:

Posting Journal Entries: Journalizing- Adjusting Entries:

 Prepaid Expense Accounts

Posting Journal Entries:
They are expenses paid in advance, the benefits of
A.
which have not yet been given or received.
At the end of the accounting period, these
expenses are adjusted to reflect the asset portion
and the expired cost.
Two Methods of Accounting for Prepaid Expense
1. Asset Method
- When an asset account is debited at the
B.
time of payment.
Example:
A. Prepaid Rent represents 5 months starting
October 1, 2017.

B. Prepaid Rent represents 5 months starting July 1,

2017. 2. Expense Method
- When an expense account is debited at the
time of payment.

 Ending Inventory of Supplies or Materials/

Supplies Inventory
At the end of the accounting period, the
business usually conducts an inventory of
supplies to update the status of present
supplies, debit the supplies expense and
credit the supplies.
Example: Method for Depreciation
A. 40% of the supplies still on hand. 1. Allowance Method
The method of computing depreciation by
allocation of a certain percentage of the usability
of the fixed assets.
Example:
B. 40% of the supplies has been used.
Furniture and Fixtures has an annual depreciation
of 5%, purchased June 1, 2017

Journalizing- Adjusting Entries

Journalizing- Adjusting Entries

Posting Journal Entries:

Posting Journal Entries

 Adjustment for the Depreciation of the

Fixed Assets
Depreciation may be defined as that portion of the 2. The Straight Line Method
cost of fixed asset that is charged to income for a
One of the methods of computing depreciation
particular year or period.
results in the equal distribution of charges over
All property and equipment except land are subject life of the asset. The formula is:
to depreciation.
Depreciation is the decrease in the value of an or
asset due to wear and tear and obsolescence.
C= cost is the price of the asset
SV= Scrap Value or Salvage Value is the amount
that can be received from the sale of the asset
after its estimated life.
N= Useful Life– is the estimated service life of the
asset
Example:
Equipment has an estimated useful life of 10 year
with a scrap value of P1,500, purchased January 1,
2017
Journalizing- Adjusting Entries
Posting Journal Entries
 Pre-collected
Pre-collected Income refers to income received in
advance before services are rendered.
At the end of the accounting period, this income is
to be adjusted to reflect the income portion and
the liability portion.
2 Methods of Recording Pre-Collected Income
1. Income Method– when an income account is
credited at the same the money is received.
2. Liability Method– when a liability account is
credited at the time the money is received.
The procedure to be followed in the pre-collected
income are the same as in the prepaid expense. The
only difference is the account title used.
 Unearned Income/ Accrued
They are income already earned but not yet
collected. Some income are collected after the
accounting period.
If no adjusting entry is made, the income in the
Income Statement will be understated. To adjust
an accrued income, debit a receivable account and
credit an income account.
Example:
5% of the Repair Income still unearned.
Journalizing- Adjusting Entries
Posting Journal Entries
  Accrued Expense Accounts
They are expenses already incurred but not yet
paid. Some expenses are paid after the accounting
period after the accounting period.
If no adjustment is made, the expense account is
understated. To adjust accrued expense, debit the
expense account and credit payable.
Example:
The following expenses still unpaid. Salaries P2,000
and utilities P1,500.

Journalizing- Adjusting Entries

ADJUSTMENT, WORKSHEET AND FINANCIAL

STATEMENT
Example (to be used for the whole lesson):
Posting Journal Entries
 Parts of a Worksheet
The basic form of a 10 column worksheet could be
presented as follows:

Journalizing
Note: Write the heading at the center of the
topmost of the worksheet: business name, the title
“WORKSHEET” and the date of the worksheet
(Accounting Period).

STEPS (not sure dito shshsh, kung ano man)

1.) Copy the trial balance on the first two column.

The Worksheet
The worksheet or work paper is a device used as
convenient and orderly way of organizing the
accounting data to facilitate the preparation of
adjusting entries, financial statements, and closing
entries.
It is called as the accountant’s scratch paper. It is
not part of formal accounting records, but it is an
aid used to accumulate and organize data, thus
facilitate the checking, handling and keeping of the
accounting records.
2.) Now, put the adjustment from the Adjusting
Entries (General Journal). Extend the amount if the
account title is already included, if not, put at the
bottom.
Note: The sequence of the account titles in this
worksheet isn’t base on the chart of accounts. (Ang
pagkakasunod-sunod ay base na sa items).
If both amounts on one account title is on the same
side (DR, DR or CR, CR), you will add it. If the two
amounts are on different side (DR, CR), you will
subtract.
Example: Both of the amount in the Salary Expense
from the Unadjusted Trial Balance and the
Adjustment is on the DR side, you will add them.

4. Put the income statement on the fourth two

lines. The adjusted amount of revenue and
expense.

3.) Put the Adjusted Trial Balance (the trial balance

after adjustment ahshshahhaha)
Note: Kung saan mas malaki ung amount, duon
imiminus at duon ilalagay ung adjusted amount.
(Example mas malaki ang nasa debit side, sa debit
mo ilalagay ung amount after maadd or
masubtract)
 The Financial Statements (Service Concern)
Financial Statements are the end-result or main
output of the accounting process by which
information accumulated processed is periodically
communicated to the users.
Income Statement
- Also called as the Statement of Operation,
is a formal statement showing the
performance of an enterprise for a given
period of time which is primarily measured
in terms of level of income earned through
the effective and efficient use of its
available resources.
5. Prepare the balance sheet and put it on the last - The basic accounting element in measuring
two lines. You will put on this side all the accounts the results of operations of the business are
that wasn’t included in the income statement. Revenues, Expenses and Net Income.
- If the expenses exceed the revenues, the
difference is a NET LOSS.
- A Net Income increases the Owner’s Equity,
Thus, the following equation is observed in
the Income Statement:

Revenue- Expenses = Net Income/ Net Loss

Single Step Form
- The income statement for service business
is usually prepared in single step form. This
is a presentation where all income are
grouped together in one section, all
expenses in one another section and the
result of operations is determined by a
single-step operation by deducting the
total expenses from the total income.
Example:

(ilalagay ko sa huli ung clear image nyan)

Guidelines in Preparing an Income Statement: Guidelines in Preparing Balance Sheet:
(from the book)
1. Headings. The heading of balance sheet and the
heading of an Income Statement are significantly
different in the manner of time period it is
reported on. The balance sheet gives information
as of given date whereas the Income statement
gives information for given time period.
2. Place the Heading of the Income Statement at
the center.
3. Arrange the accounts according to magnitude
1. Account Form- presents the accounts as in a T-
(big amount first) or according to the relative
accounts, with the Assets shown in the left side
importance of the information to the user.
and the Liabilities and Owner’s Equity on the Right
4. Put all the miscellaneous accounts, whether Side. Example:
income or expenses as the last account in every
section.
5. Put a Peso sign on the first amount in every
column at after everything.
6. Single-Rule after every arithmetic operation.
Double-Rule the final result of Net Income or Net
Loss.
From PPT ni sir:

2. Report Form- The different basic elements are

presented vertically as in ordinary report. Example:

Balance Sheet
- Also called as the Statement of Financial
Condition, is a formal statement that
presents the assets, liabilities and equity of
an enterprises as of a particular date.
- Balance Sheet Presentation: A balance
sheet may be prepared in any two forms:
(1) Account Form (2) Report Form.
 The Net Income in the Worksheet and in
the Income statement should be the same.
 The total in the Balance Sheet in the
Worksheet and on the Balance Sheet
Statement is not necessarily the same.
 Contra Assets such as Allowance for Bad
Debts, Accumulated Depreciation for
Furniture and Fixture, and Equipment are
called contra assets for they are being
subtracted from the assets.
 To balance the side of credit side of Balance
Sheet in the Worksheet, you will add the
Net Income to the CR side.
 To get the Net Income in the Income
Statement in the Worksheet, you need to
subtract the total of the Debit to the total
Credit.
Direct link para sa mga pages sa book:
(1)https://drive.google.com/file/d/11Ke1_CJ4hZAF
bVxd3jGTmlpi20m8iAsT/view?usp=sharing
Goooddluuucckkkkkkkkk! Fightinggg!!!
Set a goal so big that you can’t achieve it until you
grow into a person who can.