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Impact of Adjusted Entries by Group 1

Fernando Casco-Downing, Katie Fleming, Michael Kubik, Emily Stone, Fei Wang

Chapter 3-1

Introduction
  

Accounting Equation (A= L + SE) Accounting Cycle Accounting Concepts
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Revenue Expense Revenue Recognition Matching Principle



Chapter 3-2

Types of Adjusted Entries Examples of Adjusted Entries Impact without entries

Chapter 3-3 . For every Debit there must be a Credit. liabilities and stockholders’ equity of a business: Illustration 3-3 The equation must be in balance after every transaction.The Accounting Equation Relationship among the assets.

Trial balance 4. Closing entries 6. Adjusted trial balance Chapter 3-4 . Post-closing trail balance 7. Financial Statements Work Sheet Illustration 3-6 1. Reversing entries 8.The Accounting Cycle Transactions 9. Journalization 2. Adjustments 5. Posting 3.

needed to ensure that the revenue recognition and matching principles are followed.recognized in the period in which they are incurred.recorded in the period in which they are earned. Chapter 3-5 .Adjusting Entries Revenues . Adjusting entries . Expenses .

Accrued Expenses. Chapter 3-6 . Revenues received in cash and recorded as liabilities before they are earned. Expenses paid in cash and recorded as assets before they are used or consumed. 4.Types of Adjusting Entries Prepayments 1. Revenues earned but not yet received in cash or recorded. Prepaid Expenses. 2. Unearned Revenues. Accruals Illustration 3-20 3. Expenses incurred but not yet paid in cash or recorded. Accrued Revenues.

Expedient Recording Method Expedient Records an expense upon payment of cash before goods or services are consumed Records revenue upon receipt of cash before goods or services are provided Chapter 3-7 .

2011. Johnson received a $45. 1 Cash 45.000 45.000 45. Dec.000 Chapter 3-8 . Service revenue was credited.000 Service revenue Service Revenue Debit Credit Debit Cash 45.000 45.000 Credit 45.Expedient General Entries Q1 : On December 1.000 payment for services to be rendered equally over a four-month period.

750 (=45.250 33.750 Unearned Service Revenue Debit Credit 33.750 33. Service revenue was credited.000-45.750 45. 31 Service revenue 33.000 payment for services to be rendered equally over a four-month period. 2011.000 11. Dec.000/4) Unearned service revenue Service Revenue Debit Credit 33.750 Chapter 3-9 .Adjusting Entries for “Unearned Revenues” Q1 : On December 1. Johnson received a $45.

000-45. Equity Overstate 33750 Net Income Overstate 33750 Retained Earning Overstate 33750 None Chapter 3-10 . Dec.000/4) Unearned service revenue (L) 33.750 (=45. Johnson received a $45.000 payment for services to be rendered equally over a four-month period.750 Total Assets Total Liab.Impact Without Adjusted Entries Q1 : On December 1. 2011. Service revenue was credited. 31 Service revenue (SE) 33. Understate 33750 Stk.

Standard Recording Method Standard Asset upon payment of cash Liability upon receipt of cash before goods or services are provided Chapter 3-11 .

000 payment for services to be rendered equally over a four-month period. 1 Cash 45.000 45. Dec.000 Credit 45.000 Unearned service revenue Unearned Service Revenue Debit Credit Debit Cash 45.000 45. Johnson received a $45. 2011.000 Chapter 3-12 .000 45.Standard General Entries Q1 : On December 1.

250 Unearned Service Revenue Debit Credit 11.250 45. 31 Unearned service revenue 11.Adjusting Entries for “Unearned Revenues” Q1 : On December 1. 2011.000 33.250 Service revenue Service Revenue Debit Credit 11. Johnson received a $45.750 .250 Chapter 3-13 11.250 11. Dec.000 payment for services to be rendered equally over a four-month period.

250 Chapter 3-14 Unearned Service Revenue Debit 11.250 Unearned Service Revenue Debit Credit 33.750 .000 33. General Expedient Service Revenue Debit 33.250 11.750 33.750 Credit 45.000 11.Expedient Vs.250 Credit 45.750 General Service Revenue Debit Credit 11.

000 16. 31 Prepaid Advertising 16. the company paid a local radio station $16. 2011. Prepaid advertising was debited.000 Credit 16. On December 31. Dec. throughout January and February of 2012.000 .Adjusting Entries for “Prepaid Expenses” Q2.000 for 40 radio ads that were to be aired.000 Chapter 3-15 16. 20 per month.000 Cash Prepaid Advertising Debit Credit Debit Cash 16.

Employee salaries for the month of December 2011 totaling $8.400 Chapter 3-16 8. 2012. Dec. 31 Salaries expense Salaries payable Salaries Expense Debit Credit 8.400 will be paid on January 5.400 .Adjusting Entries for “Accrued Expenses” Q3.400 8.400 Salaries Payable Debit Credit 8.400 8.

Equity Overstate 8400 Net Income Overstate 8400 Retained Earning Overstate 8400 None Chapter 3-17 . Employee salaries for the month of December 2011 totaling $8. Dec.400 Total Assets Total Liab.Adjusting Entries for “Accrued Expenses” Q3.400 8.400 will be paid on January 5. 31 Salaries expense(SE) Salaries payable(L) 8. Understate 8400 Stk. 2012.

2012.Adjusting Entries for “Accrued Expenses” Q4. borrowed $60. Johnson Corp.000 * 6% /12 *3) Dec. A note was signed with principal and 6% interest to be paid on September 1. 2011. (Interest = 60. On September 31.000 from a local bank. 31 Interest expense Interest payable Interest Expense Debit Credit Interest Payable Debit Credit 900 900 900 900 Chapter 3-18 .

Equity Overstate 900 Net Income Overstate 900 Retained Earning Overstate 900 None Chapter 3-19 . On September 31. 2012. Understate 900 Stk.000 from a local bank. 31 Interest expense(SE) Interest payable(L) 900 900 Total Assets Total Liab. A note was signed with principal and 6% interest to be paid on September 1.Adjusting Entries for “Accrued Expenses” Q4. borrowed $60.000 * 6% /12 *3) Dec. 2011. Johnson Corp. (Interest = 60.

000 8. Dec. 2011.000 8. 31 Bad Debt Expense 8.000 Chapter 3-20 .000 Allowance for Doubtful Accounts Bad Debt Expense Debit Credit Allowance for Doubtful Accounts Debit Credit 8. it was determined that $8.000 of the recorded Accounts receivable would prove to be uncollectible. On December 31.Adjusting Entries for “Accrued Expenses” Q5.

Impact Without Adjusted Entries Q5.000 Allowance for Doubtful Account (A) Total Assets Overstated 8000 Chapter 3-21 Total Liab. 31 Bad Debt Expense (SE) 8. Dec.000 of the recorded Accounts receivable would prove to be uncollectible. 2011. On December 31. it was determined that $8. Equity Overstated 8000 Net Income Overstated 8000 Retained Earning Overstated 8000 None . Stk.000 8.

Impact Without Adjusted Entries Total Assets Q1 Q2 Q3 Q4 Q5 None None None None Overstated 8000 Total Liab. Stk. Equity Net Income Overstate 33750 None Overstate 8400 Retained Earning Overstate 33750 None Overstate 8400 Understate Overstate 33750 33750 None None Understate Overstate 8400 8400 Understate Overstate 900 900 None Overstated 8000 Overstate 900 Overstated 8000 Overstate 51050 Overstate 900 Overstated 8000 Overstate 51050 Overstate Understate Overstate Total 8000 43050 51050 Chapter 3-22 .

SE. L. RE Understated A. NI. L.Conclusion  Accounting Concepts   Revenue and Expense Revenue Recognition and Matching Principle   Standard Vs. Expedient Recording Method Types of Adjusted Entries   Prepayments : Prepaid Expense and Unearned Revenue Accruals: Accrued Rev. SE. RE  Impact without adjusted entries   Chapter 3-23 . NI. and Accrued Exp. Overstated A.

Questions Chapter 3-24 .