FINANCIAL

ACCOUNTING
AND REPORTING
A022, A028 &A047

Pelilia C. Veloso, CPA, DBA

ADJUSTING
ENTRIES
 Adjustments
 Going concern assumption- the indefinite life of the
business enterprise.

 Fiscal year - twelve months ending at any date except

December 31.

 Calendar year - a time lapsed composed of tweelve months

and ending December 31,
 ACCRUAL ACCOUNTING
Accrual Accounting means that income is recognized when
earned regradless of when received and expense is
recognized when incurred regradless of when payment
is made.
 REASONS FOR ADJUSTMENTS
A. To apportioned the mixed accounts into their real and nomin
elements:
1. Provision for depreciation
2. Provision for doubtful accounts/bad debts
3. Adjustment for the expiration of prepayments of expens
4. Adjustment for the realization of income collected
in advances
 REASONS FOR ADJUSTMENTS
B. To bring into the accounts unrecorded accrued items:

1. Adjustment for accrual of expenses

2. Adjustment for accrual of income.

 PROVISION FOR DEPRECIATION
 Cost - the amount recorded as the value of assets.
This includes all the expenditures relating to the
acquisition and preparation for use of the asset.

 Residual or scrap value - the net amount which the enterp

expects to obtain from an asset at the end of its us
life after deducting the expected cost of disposal.
 PROVISION FOR DEPRECIATION
 Useful life - the period of time when an asset is expected
to be used by the enterprise.

 Depreciable cost - cost of along-lived asset less its residu

value.
STRAIGHT -LINE METHOD OF DEPRECIATION
Annual Depreciation = Cost minus residual value
life in years

= P 400,000.00 - P40,000.00
10 years

= P36,000.00
STRAIGHT -LINE METHOD OF DEPRECIATION
Depreciation P36,000.00
Accumulated Depreciation P36,000.00
To record the depreciation for the year
Methods of Estimating Doubtful Accounts Expense

1. Fixed percentage of the total sales

2. Fixed Percentage of the total credit sales
3. Percentage of accounts receivables at the end of the
accunting period
4. An amount computed thru the aging of receivables.
Methods of Estimating Doubtful Accounts Expense

Doubtful Accounts expense P xxx

Allowance for Doubtful Accounts P xxx
To record doubtful accounts expense
 Class Activities/Seatworks
Questions
Rule 4
1. True of False Pages 187-188
2. Test 1 Page 190
3. Test 2 Page 191-196
4. Test 3 Page 197-204
5. Test 4 Page 205 -206
6. Test 5 - I Page 207
Test 5- II Page 208
THANK YOU!
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