ADJUSTING ENTRIES AND

WORKSHEET
ADJUSTING ENTRIES

The adjustment to be made are the

unrecorded income and expenses, as
well as the under or overstatement
of any of the accounting values or
elements at the end of the period.
PURPOSES OF ADJUSTING ENTRIES
• To conform to the principle of of “Matching
Principle” which will result in a more accurate
measrement of the net income.
• To arrive at the correct valuation of assets and
liabilities.
• To arrive at the correct determination of the
owner's equity
The following are the usual adjsutments made at
the end of an accounting period:
• Unused Supplies
• Prepaid expenses
• Accrued Expenses
• Unearned Income
• Accrued Income
• Bad Debts/Doubtful Expense
• Depreciation
UNUSED SUPPLIES/SUPPLIES INVENTORY
• these are supplies which remain unused at the end of the accounting
period.

Unused Supplies xx
Supplies Expense xx
PREPAID EXPENSES/DEFERRED EXPENSE
• these are expenses not yet incurred but already paid.

Prepaid YYY Expense xx

YYY Expense xx
ACCRUED EXPENSE
• these are expenses already incurred but not yet paid

YYY Expense xx
Accrued YYY Expense xx
UNEARNED INCOME
• this is as an income not yet earned but already collected.

YYY Income xx
Unearned YYY Income xx
ACCRUED INCOME
• this is an income already earned but not yet collected.

Accrued YYY Income xx

YYY Income xx
DOUBTFUL EXPENSE
• this refers to the estimated receivables which may not be collected.

Doubtful expense xx
Allowance for Doubful Expense xx
How to compute Estimated Doubtful Expense

•Doubtful Expense may be estimated by any

of the following methods:
• a fixed percentage of sales
• a fixed percentage of the accounts receivable
• aging the receivable (higher accounting)
EXAMPLE
The following slected accounts appear in the preliminary trial balance
as at December 31, 200G
Sales P180, 000
Accounts Receivable 30, 000
ALlowance for Doubtful Accounts 1, 200

1. Doubtful Expense are expected to be at 1% of sales

2. Doubtful Expense are estimated at 9% of accounts receivable
1. Doubtful Expense are expected to be at 1% of
sales
ADJUSTING ENTRY:

Doubtful Expense 1, 800*

AFDA 1, 800

*P180, 000 x 1% = P1, 800

2. Doubtful Expense are estimated at 9% of
accounts receivable
ADJUSTING ENTRY:

Doubtful Expense 1, 500*

AFDA 1, 500

*P30, 000 x 9% = P2, 700 ( equivalent to ending balance of AFDA)

less: Beg bal 1, 200
Current Expense 1, 500
DEPRECIATION
• refers to the decrease in the value of a non-current asset(fixed asset)
due to the ordinary wear and tear or passage of time.

Depreciation-YYY xx
Accumulated Depreciation-YYY xx
How to compute depreciation

COST - SALVAGE/SCRAP VALUE X Number of months

LIFE
WORKSHEET

•is a columnar working paper which will

show all the accounts togeteher with their
adjsuted amounts that will appear in the
financial statements.
PRACTICE!!!!
ADJUSTMENTS FOR AUTO REPAIR SHOP

1. Unused Supplies, P367.80

2. One half of the advertising expense is still prepaid.
3. Unpaid water bill, P995.12
4. Uncollected Rental Income, P2, 500
5. Accrued Interest on the note payable, P20
6. P5, 000 of the repair income is collected in advance and not yet
earned.
PRACTICE
7. The fixed asset are to be depreciated as follows:
Furniture and Fixtures P1, 553
Office Equipment 1, 200
Repair Equipment 2, 350
8. Doubtful Expense, P370