Adjusting Entries:

Deferred Revenue
Lesson 16
Objectives
• Prepare adjusting entries using two methods – liability
method and revenue method
V Consultancy received P150,000 representing advanced
payment for six (6) months tax compliance and consultancy
services from one of their clients on November 1, 2020. The
accounting period of the entity ends on December 31, 2020.
Adjusting Entries:
Accruals
Lesson 17
Objectives
• Prepare adjusting entries for accrued revenue.
• Prepare adjusting entries for accrued expenses.
Accrued Revenue
Hope Tax Consultancy rendered year-end tax compliance
and consultancy services to RM Company on December 15-
19, 2020 amounting to P50,000. It was ascertained that RM
Company will be paying Hope Tax Consultancy during the
first quarter of 2021. Prepare the adjusting entry at
December 31, 2020.
Accrued Expenses – Salaries
Hope Tax Consultancy pays their liaison officers on a weekly
basis. The company has ten (10) liaison officers receiving P3,000
weekly, every Friday. The last day of the year, December 31,
2020, fell on a Thursday. Prepare the necessary adjusting entry
on December 31, 2020, and the entry to record the payment of
the weekly salary on January 1, 2021, Friday.
Accrued Expenses – Salaries
Hope Tax Consultancy borrowed P200,000 from a bank,
evidenced by a note of promise to pay on May 1, 2020 with
an interest rate of 12%. Both the principal and the interest is
payable after one year, that is, April 30, 2021. Prepare all
necessary entries (a) without the use of reversing entries
and (b) with the use of reversing entries.