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Accruals-7 10 2020
Accruals-7 10 2020
Accruals
◦ Recognition of transaction when incurred or earned, not when received or paid.
Example:
Interest Receivable XXX
Interest Income XXX
Accrued Expense
Expense XXX
Liability (Payable) XXX
Example:
Rent Expense XXX
Rent Payable XXX
Sample Problems
1. Markus accrued P9,000 rent expense at the end of the period.
Sample Problems
1. Markus accrued P9,000 rent expense at the end of the period.
P50,000 for 5 days divided by 5 x 3 = P30,000 (Accrual should be until February 28 only)
Sample Problems
3. On December 31, 2019, Acala Co. received Meralco bill amounting to
P23,000. Payment was made on January 3, 2020. What is the journal entry to
record accrual at year end of December 31, 2019?
Sample Problems
3. On December 31, 2019, Acala Co. received Meralco bill amounting to P23,000.
Payment was made on January 3, 2020. What is the journal entry to record accrual
at year end of December 31, 2019?
December 31
Interest Expense P1,250
Interest Payable P1,250
or
Interest Expense P1,250
Accrued Interest Expense P1,250
Sample Problems
5. On October 1, Mr. A issued a promissory note to Mr. B. The principal was
P50,000 with nominal rate of 10% term of 6 months. Mr. A has fiscal year
end of January 31.
Sample Problems
5. On October 1, Mr. A issued a promissory note to Mr. B. The principal was P50,000
with nominal rate of 10% term of 6 months. Mr. A has fiscal year end of January 31.
January 31
Interest Expense 1,667
Interest Payable 1,667
or
Interest Expense 1,667
Accrued Interest Expense 1,667
Principal: P50,000
Rate: 10%
Period of Accrual: October 1-January 31 (4 months)
◦ P50,000 x 10% = P5,000 (annual interest)
◦ P5,000 / 12 mos = P416.67 (monthly interest)
◦ P416.67 x 4 months = P1,667
January 31
Interest Expense 1,667
Interest Payable 1,667
or
Interest Expense 1,667
Accrued Interest Expense 1,667
Sample Problems
6. On October 1, Mr. A issued a promissory note to Mr. B. The principal was
P50,000 with nominal rate of 10% term of 6 months. Mr. B uses calendar
year-end in his reporting.
Sample Problems
6. On October 1, Mr. A issued a promissory note to Mr. B. The principal was P50,000 with
nominal rate of 10% term of 6 months. Mr. B uses calendar year-end in his reporting.
December 31
Interest Receivable P1,250
Interest Income P1,250
or
Accrued Interest Income P1,250
Interest Income P1,250
Sample Problems
7. On October 1, Mr. A issued a promissory note to Mr. B. The principal was
P50,000 with nominal rate of 10% term of 6 months. Mr. B uses has fiscal
year end of February 28.
Sample Problems
7. On October 1, Mr. A issued a promissory note to Mr. B. The principal was
P50,000 with nominal rate of 10% term of 6 months. Mr. B has a fiscal year end of
February 28.
February 28
Interest Receivable P2,083
Interest Income P2,083
or
Accrued Interest Income P2,083
Interest Income P2,083
Questions?