FLIGHTS OF WISDOM 9

PA SESSION 2
Navigators: Nha Linh
Captains: Thanh Xuan, Gia Huy, Minh Thanh
Chapter 3:
Adjusting
The
Accounts
 Accounting time periods
are generally a month,
a quarter, or a year.
Interim period: monthly and quarterly time
periods.
Fiscal years: 1 year length
Example: from 01/04/2023 to 31/03/2024
Calendar year: must be from January 1 to
December 31.
Accrual-versus Cash-basis
Accounting
Cash basis accounting:
Record revenue only when we receive cash
Record expense when we pay out cash
Accrual-basis accounting:
Record transactions when the event occurs
Recognize revenue when they perform
service
Recognize expense when incurred
Type of adjusting entries
1 2 3 4

Prepaid Unearned Accrued Accrued

Expense Revenue Revenue Expense

deferrals accruals
(nhận trước hoặc trả trước) (nhận sau hoặc trả sau)
Prepaid Expense & Unearned Revenue
Prepaid Expense & Unearned Revenue
Depreciation
Accumulated Depreciation: contra asset account
 Accrued Revenue & Accrued Expense

Account Receivable
Accrued Revenue & Accrued Expense
Purpose of an adjusted trial balance
Prove the equality of the total Debit balances and the total Credit balances in the ledger
after all adjustments.
An adjusted trial balance is the primary basis for the preparation of financial statements.
Companies can prepare financial statements directly from adjusted trial balance.
Chapter 4:
Completing
The
Accounting
Cycle
Worksheet
Financial statements can be prepared
directly from the worksheet before
journalizing and posting the adjusting
entries.

The use of worksheet is optional.

A worksheet is not a journal, and it

cannot be used as a basis for posting to
ledger accounts.
Worksheet
Example
 Closing Entries

Think "RED"for temporary account that get "closed out"

Close (Zero out) temporary accounts such as revenues, expenses, and drawings.

Permanent accounts (balance sheet accounts) are not closed at the end of the period and
are carried forward from year to year.
Closing Entries
*Key:

1. Close Revenues to Income

Summary
2. Close Expenses to Income
Summary
3. Close Income Summary to
Owner's Capital
4. Close Owner's Drawings to
Owner's Capital

You have to do sequentially!

Post- Closing
Trial Balane

Proves the equality of the permanent

account balances that the company carries
forward into the next accounting period.

After the closing entries are posted, all the

temporary accounts have zero balances and
they are not shown on the post-closing trial
balance.
Accounting Cycle
1 2 3 4

Analyze Posting to
Journalize the Prepare a trial
business ledger
transactions balance
transactions accounts
Accounting Cycle
5 6 7
4

Journalize and Prepare an Prepare

post adjusting adjusted trial financial
entries balance statements
Accounting Cycle
8 9

Journalize and Prepare a post-

post closing closing trial
entries balance
Correcting Entries

◆ Unnecessary if accounting records are free of errors.

◆ Made whenever an error is discovered.
◆ Must be posted before closing entries
Classified
balance sheet
Classified
balance
sheet
Classified
balance
sheet
Thank You
For
Listening

Don't hesitate to to ask

any questions