Post on 15-Dec-2015
Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved.
Review of the Accounting
Process
2
Insert Book Cover Picture
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The Basic Model
Economic events cause changes in the financial position of a company.
External events involve an exchange
between the company and another entity.
Internal events do not involve an exchange
transaction but do affect the company’s
financial position.
2-3
Learning Objectives
Analyze routine economic events—transactions—and record their effects on a
company’s financial position using the accounting equation format.
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The Accounting Equation
A = L + OE- Owner Withdrawals+ Owner Investments
- Expenses- Losses
+ Revenue+ Gains
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Accounting Equation for a Corporation
A = L + SE+ Retained Earnings+ Paid-in Capital
- Expenses- Losses
+ Revenues+ Gains
- Dividends
2-6
Account Relationships
Debits and credits affect the Balance Sheet Model as follows:
Debits and credits affect the Balance Sheet Model as follows:
A = L + PIC + REAssets
Dr.+
Cr.-
LiabilitiesDr.-
Cr.+
Paid-inCapital
Dr.-
Cr.+
Retained EarningsDr.-
Cr.+
Revenues and GainsDr.-
Cr.+
Expenses and Losses
Dr.+
Cr.-
2-7
Account Relationships
A = L + PIC + RE + R + G- E - L
Permanent accounts represent the basic financial position elements of the
accounting equation.
Temporary accounts keep track of the changes in the
retained earnings component of
shareholders’ equity.
Debits and credits affect the Balance Sheet Model as follows:
Debits and credits affect the Balance Sheet Model as follows:
2-8
Source documents
Record in Journal
Financial Statements
Transaction Analysis
Post to Ledger
Unadjusted Trial Balance
Record & Post Adjusting
Entries
Adjusted Trial Balance
Close Temporary Accounts
Post-Closing Trial Balance
The Accounting Processing
Cycle
2-10
Accounting Processing Cycle
On January 1, 2007, $40,000 was borrowed from a bank and a note payable was signed.
Prepare the journal entry.
Two accounts are affected:Cash (an asset) increases by $40,000.Notes Payable (a liability) increases by $40,000.
Account numbers are references for posting to
the General Ledger.
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General Ledger
The “T” account is a shorthand used byaccountants to analyze transactions. Itis not part of the bookkeeping system.
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Learning Objectives
Post the effects of journal entries to T-accounts and prepare an unadjusted trial
balance.
2-13
Posting Journal Entries
On July 1, 2006, the owners invest $60,000 in a new business, Dress Right Clothing Corporation.
GENERAL JOURNAL Page 1
Date DescriptionPost. Ref. Debit Credit
July 1 Cash 60,000Common Stock 60,000
Post the debit portion of the entry to the Cash ledger account.Post the debit portion of the entry to the Cash ledger account.
2-18
Posting Journal Entries
Post the credit portion of the entry to the Common Stock ledger account.
Post the credit portion of the entry to the Common Stock ledger account.
1
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After recording all entries for the period, Dress Right’s Trial Balance would be as follows:
After recording all entries for the period, Dress Right’s Trial Balance would be as follows:
Debits = Credits
A Trial Balance is a listing of all
accounts and their
balances at a point in
time.
A Trial Balance is a listing of all
accounts and their
balances at a point in
time.
2-23
Additional Consideration
Perpetual Inventory System
Inventory account is continually updated to
reflect purchases and sales.
Cost of goods sold account is continually updated to
reflect sales.
Periodic Inventory System
Purchases account reflects purchases of
inventory.
Cost of goods sold and inventory are adjusted at
period end.
Discussed in more depth in
Chapters 8 & 9.
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Adjusting Entries
At the end of the period, some transactions or
events remain unrecorded.
Because of this, several accounts in the ledger
need adjustments before their balances appear in the financial
statements.
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Learning Objectives
Identify and describe the different types of adjusting journal entries.
Determine the required adjustments, record adjusting journal entries in general journal
format, and prepare an adjusted trial balance.
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Prepaym ents(Deferrals)
Accruals Estimates
Adjusting Entries
Transactions where cash is paid or received
before a related expense or revenue is
recognized.
Transactions where cash is paid or received after a related expense
or revenue is recognized.
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Asset Expense
UnadjustedBalance
CreditAdjustment
DebitAdjustment
Prepaid Expenses
Today, I will payfor my first
6 months’ rent. Prepaid Expenses
Items paid for in advance of receiving their benefits
2-28
Prepaid Expenses
Assume that on July 31, 2006, Dress Right determines that at the end of July $1,200 of supplies remains. Let’s look at the adjusting
journal entry needed on July 31, 2006.
Prepare the adjusting entry.
$2,000 - $1,200 = $800 supplies used
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After posting, the accounts look like this:
Prepaid Expenses
Beg. bal. - 2,000 800
Bal. 1,200
SuppliesBeg. bal. -
800 Bal. 800
Supplies Expense
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Depreciation is the process of computing expense by allocating the cost of plant and equipment over their expected useful lives.
Straight-LineDepreciationExpense
= Asset Cost - Salvage Value
Useful Life
Depreciation
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Depreciation
Recall the Furniture and Fixtures for $12,000 listed on Dress Right’s unadjusted trial balance. Assume the
following:
Let’s calculate the depreciation expense for the month ended July 31, 2006.
Asset Cost 12,000$ Salvage Value - Useful Life 60 months
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2006Depreciation
Expense=
$12,000 - $0
60 months= $200
Recall the Furniture and Fixtures for $12,000 listed on Dress Right’s unadjusted trial balance. Assume the
following:
Depreciation
Now, prepare the adjusting entry for July
31, 2006.
Asset Cost 12,000$ Salvage Value - Useful Life 60 months
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GENERAL JOURNAL Page 2Date Description PR Debit Credit
July 31 Depreciation Expense 200Accumulated Depr. - Furniture & Fixtures 200
To record depreciation Contra Asset
Depreciation
Let’s see how the accounts would look after posting!
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After posting, the accounts look like this:
Depreciation
Beg. bal. - 12,000
Bal. 12,000
Furniture and FixturesBeg. bal. -
200 Bal. 200
Depreciation Expense
- Beg. bal.200 200 Bal.
Accumulated Depreciation
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Liability RevenueUnadjusted
BalanceCredit
AdjustmentDebit
Adjustment
Unearned Revenues
“Go Big Blue”
Buy your season tickets forall home basketball games NOW! Unearned Revenue
Cash received in advance of performing
services
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For Dress Right Corporation, the only unearned revenue in the trial balance is unearned rent revenue. On July 16
Dress Right received $1,000 in advance for the first two months’ rent.
First, let’s prepare the entry for July 16.
Unearned Revenues
Liability Account
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Unearned Revenues
For Dress Right Corporation, the only unearned revenue in the trial balance is unearned rent revenue. On July 16
Dress Right received $1,000 in advance for the first two months’ rent.
Now, let’s prepare the adjusting entry for July 31.
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Unearned Revenues
After posting, the accounts look like this:
- Beg. bal.250 1,000
750 Bal.
Unearned Rent Revenue- Beg. bal.250 250 Bal.
Rent Revenue
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Alternative Approach to Record Prepayments
Unearned RevenueRecord initial cash receipts
as follows:
Cash $$$ Revenue $$$
Adjusting EntryRecord the amount for the
unearned liability as follows:
Revenue $$ Unearned revenue $$
Prepaid ExpensesRecord initial cash
payments as follows:
Expense $$$ Cash $$$
Adjusting EntryRecord the amount for the
prepaid expense as follows:
Prepaid expense $$ Expense $$
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Expense LiabilityCredit
AdjustmentDebit
Adjustment
Accrued Liabilities
I won’t pay youuntil the job is done!
Accrued Liabilities
Costs incurred in a period that are both unpaid and
unrecorded
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7/1/06 7/31/06Month end
Last paydate
7/20/06
Next paydate
8/2/06
Record adjustingjournal entry.
Accrued Liabilities
On July 31, 2006, the employees have earned
salaries of $5,500.
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Accrued Liabilities
After posting, the accounts look like this:
Beg. bal. - 5,000 5,500
Bal. 10,500
Salaries Expense- Beg. bal.
5,500 5,500 Bal.
Salaries Payable
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Asset Revenue
CreditAdjustment
DebitAdjustment
Accrued Receivables
Yes, you can pay mein May for your April
15 tax return.Accrued Receivables
Revenues earned in a period that are both
unrecorded and not yet received
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Assume that Dress Right loaned another corporation $30,000 at the beginning of August. Terms of the note
call for the payment of principal, $30,000, and interest at 8% in three months.
First, let’s determine the amount of interest to accrue at August 31, 2006.
Accrued Receivables
P × R × T $30,000 .08 1/12
Interest = $200
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Assume that Dress Right loaned another corporation $30,000 at the beginning of August. Terms of the note
call for the payment of principal, $30,000, and interest at 8% in three months.
Now, let’s prepare the adjusting entry for August 31, 2006.
Accrued Receivables
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Accrued Receivables
After posting, the accounts look like this:
Beg. bal. - 200
Bal. 200
Interest Receivable- Beg. bal.200 200 Bal.
Interest Revenue
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Estimates
Uncollectible accounts and depreciation of fixed assets are estimated.
An estimated item is a function of future events and developments.
$$
2-48
Estimates
The estimate of bad debt expense at the end of the period is an example of an adjusting entry that requires
an estimate.
Assume that Dress Right’s management determines that of the $2,000 of accounts receivable recorded at July 31,
2006, only $1,500 will ultimately be collected. Prepare the adjusting entry for July 31, 2006.
2-49DRESS RIGHT CLOTHING CORPORATIONAdjusted Trial Balance
July 31, 2006Account Title Debits CreditsCash 68,500$ Accounts receivable 2,000 Allowance for uncollectible accounts 500$ Supplies 1,200 Prepaid rent 22,000 Inventory 38,000 Furniture and fixtures 12,000 Accumulated depr.-furniture & fixtures 200 Accounts payable 35,000 Note payable 40,000 Unearned rent revenue 750 Salaries payable 5,500 Interest payable 333 Common stock 60,000 Retained earnings 1,000 Sales revenue 38,500 Rent revenue 250 Cost of goods sold 22,000 Salaries expense 10,500 Supplies expense 800 Rent expense 2,000 Depreciation expense 200 Interest expense 333 Bad debt expense 500 Totals 181,033$ 181,033$
This is the Adjusted Trial Balance for
Dress Right after all adjusting entries have
been recorded and posted.
Dress Right will use these balances to
prepare the financial statements.
2-52
Current assets: Cash 68,500$ Accounts receivable 2,000$ Less: Allowance for uncollectible accounts 500 1,500 Supplies 1,200 Inventory 38,000 Prepaid rent 22,000 Total current assets 131,200 Property and equipment: Furniture and fixtures 12,000 Less: Accumulated depreciation 200 11,800 Total assets 143,000$
Dress Right Clothing CorporationBalance SheetAt July 31, 2006
Assets
The balance sheet presents the financial position of the company on a particular date.
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Current liabilities: Accounts payable 35,000$ Salaries payable 5,500 Unearned rent revenue 750 Interest payable 333 Note payable 10,000 Total current liabilities 51,583 Long-term liabilities: Note payable 30,000 Shareholders' equity: Common stock 60,000$ Retained earnings 1,417 Total shareholders' equity 61,417 Total liabilities and shareholders' equity 143,000$
Dress Right Clothing CorporationBalance SheetAt July 31, 2006
Liabilities and Shareholders' Equity
The balance sheet presents the financial position of the company on a particular date.
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The statement of cash flows discloses the changes in cash during a period.
Cash flows from operating activities:Cash inflows: From customers 36,500$ From rent 1,000 Cash outflows: For rent (24,000) For supplies (2,000) To suppliers for merchandise (25,000) To employees (5,000) Net cash used by operating activities (18,500)$ Cash flows from investing activities: Purchase of furniture and fixtures (12,000) Cash flows from financing activities: Issue of capital stock 60,000$ Increase in notes payable 40,000 Payment of cash dividend (1,000) Net cash provided by financing activities 99,000 Net increase in cash 68,500$
Dress Right Clothing CorporationStatement of Cash Flows
For the Month of July 2006
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The statement of shareholders’ equity presents the changes in permanent shareholder accounts.
Common Stock
Retained Earnings
Total Shareholders'
EquityBalance at July 1, 2006 -$ -$ -$ Issue of capital stock 60,000 60,000 Net income for July 2006 2,417 2,417 Less: Dividends (1,000) (1,000) Balance at July 31, 2006 60,000$ 1,417$ 61,417$
Dress Right Clothing CorporationStatement of Shareholders' Equity
For the Month of July 2006
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The Closing Process
Resets revenue, expense and dividend account balances to zero at the end of the period.
Helps summarize a period’s revenues and expenses in the Income Summary account.
Identify accounts for closing.
Record and post closing entries.
Prepare post-closing trial balance.
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Temporary Accounts
Revenues
Income Summary
Exp
ense
s
Divid
end
s
Permanent Accounts
Assets
Lia
bili
ties
Sh
areho
lders’
Eq
uity
The closing process applies only to temporary accounts.
Temporary and Permanent Accounts
2-59
Close Revenue accounts to Income Summary.
Close Expense accounts to Income Summary.
Close Income Summary account to Retained Earnings.
Let’s prepare the closing entries for
Dress Right.
Closing Entries
2-60DRESS RIGHT CLOTHING CORPORATIONAdjusted Trial Balance
July 31, 2006Account Title Debits CreditsCash 68,500$ Accounts receivable 2,000 Allowance for uncollectible accounts 500$ Supplies 1,200 Prepaid rent 22,000 Inventory 38,000 Furniture and fixtures 12,000 Accumulated depr.-furniture & fixtures 200 Accounts payable 35,000 Note payable 40,000 Unearned rent revenue 750 Salaries payable 5,500 Interest payable 333 Common stock 60,000 Retained earnings 1,000 Sales revenue 38,500 Rent revenue 250 Cost of goods sold 22,000 Salaries expense 10,500 Supplies expense 800 Rent expense 2,000 Depreciation expense 200 Interest expense 333 Bad debt expense 500 Totals 181,033$ 181,033$
Close Revenue accounts to
Income Summary.
2-61
GENERAL JOURNAL Page 34
Date DescriptionPost. Ref. Debit Credit
July 31 Sales Revenue 38,500
Rent Revenue 250
Income Summary 38,750
Now, let’s look at the ledger accounts after posting this closing entry.
Close Revenue Accounts to Income Summary
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Income Summary38,750
38,750
Sales Revenue38,500 38,500
-
Rent Revenue250 250
-
Close Revenue Accounts to Income Summary
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Close Expense accounts to
Income Summary.
DRESS RIGHT CLOTHING CORPORATIONAdjusted Trial Balance
July 31, 2006Account Title Debits CreditsCash 68,500$ Accounts receivable 2,000 Allowance for uncollectible accounts 500$ Supplies 1,200 Prepaid rent 22,000 Inventory 38,000 Furniture and fixtures 12,000 Accumulated depr.-furniture & fixtures 200 Accounts payable 35,000 Note payable 40,000 Unearned rent revenue 750 Salaries payable 5,500 Interest payable 333 Common stock 60,000 Retained earnings 1,000 Sales revenue 38,500 Rent revenue 250 Cost of goods sold 22,000 Salaries expense 10,500 Supplies expense 800 Rent expense 2,000 Depreciation expense 200 Interest expense 333 Bad debt expense 500 Totals 181,033$ 181,033$
2-64
GENERAL JOURNAL Page 34
Date DescriptionPost. Ref. Debit Credit
July 31 Income Summary 36,333
Cost of goods sold 22,000
Salaries expense 10,500
Supplies expense 800
Rent expense 2,000
Depreciation expense 200
Interest expense 333
Bad debts expense 500
Now, let’s look at the ledger accounts after posting this closing entry.
Close Expense Accounts to Income Summary
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Cost of Goods Sold22,000 22,000
-
Depreciation Exp.200 200
-
Salaries Expense10,500 10,500
-
Supplies Expense800 800
-
Rent Expense2,000 2,000
-
Close Expense Accounts to Income Summary
Interest Expense333 333
-
Income Summary36,333 38,750
2,417
Net Income
Bad Debts Exp.500 500
-
2-66
Close Income Summary to
Retained Earnings.
DRESS RIGHT CLOTHING CORPORATIONAdjusted Trial Balance
July 31, 2006Account Title Debits CreditsCash 68,500$ Accounts receivable 2,000 Allowance for uncollectible accounts 500$ Supplies 1,200 Prepaid rent 22,000 Inventory 38,000 Furniture and fixtures 12,000 Accumulated depr.-furniture & fixtures 200 Accounts payable 35,000 Note payable 40,000 Unearned rent revenue 750 Salaries payable 5,500 Interest payable 333 Common stock 60,000 Retained earnings 1,000 Sales revenue 38,500 Rent revenue 250 Cost of goods sold 22,000 Salaries expense 10,500 Supplies expense 800 Rent expense 2,000 Depreciation expense 200 Interest expense 333 Bad debt expense 500 Totals 181,033$ 181,033$
2-67
GENERAL JOURNAL Page 34
Date DescriptionPost. Ref. Debit Credit
July 31 Income Summary 2,417
Retained Earnings 2,417
Now, let’s look at the ledger accounts after posting this closing entry.
Close Income Summary to Retained Earnings
2-68 Close Income Summary to Retained Earnings
Income Summary36,333 38,750 2,417
-
Retained Earnings1,000 2,417
1,417
2-69
Post-Closing Trial Balance
Lists permanent accounts and their
balances.
Total debits equal total credits.
DRESS RIGHT CLOTHING CORPORATIONPost-Closing Trial Balance
July 31, 2006Account Title Debits CreditsCash 68,500$ Accounts receivable 2,000 Allowance for uncollectible accounts 500$ Supplies 1,200 Prepaid rent 22,000 Inventory 38,000 Furniture and fixtures 12,000 Accumulated depr.-furniture & fixtures 200 Accounts payable 35,000 Note payable 40,000 Unearned rent revenue 750 Salaries payable 5,500 Interest payable 333 Common stock 60,000 Retained earnings 1,417 Totals 143,700$ 143,700$
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Conversion From Cash Basis to Accrual Basis
Adjusting entries, for the most part, are conversions from cash to accrual.
Let’s look at an example.
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Conversion From Cash Basis to Accrual Basis
Jeter, Inc. paid $20,000 cash for insurance during the current period. On Jan. 1, Prepaid Insurance was $5,000, and on Dec. 31, the account balance
was $3,000.
Determine Insurance Expense for the period.
2-73
Conversion From Cash Basis to Accrual Basis
Prepaid Insurance
Balance, 1/1 5,000$ Plus: Cash paid 20,000 Less: Insurance expense (22,000) Balance, 12/31 3,000$
Jeter, Inc. paid $20,000 cash for insurance during the current period. On Jan. 1, Prepaid Insurance was $5,000, and on Dec. 31, the account balance
was $3,000.
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Use of a Worksheet
A worksheet can be used as a tool to facilitate the preparation of adjusting and closing entries and the
financial statements.
Steps to Follow for Worksheet Completion:
1. Enter account titles in column 1 and the unadjusted trial balances in columns 2 and 3.
2. Determine end-of-period adjusting entries and enter them in columns 4 and 5.
3. Add or deduct the effects of the adjusting entries on the account balances and enter in columns 6 and 7.
4. Transfer the temporary retained earnings account balances to columns 8 and 9.
5. Transfer the balances in the permanent accounts to columns 10 and 11.
Let’s look at the completed worksheet for Dress Right.
2-76
Account Title Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.Cash 68,500 68,500 68,500 Accounts receivable 2,000 2,000 2,000
Allowance for uncollectible accounts - (7) 500 500 500 Supplies 2,000 (1) 800 1,200 1,200 Prepaid rent 24,000 (2) 2,000 22,000 22,000 Inventory 38,000 38,000 38,000 Furniture and fixtures 12,000 12,000 12,000 Accumulated depr.- furniture & fixtures - (3) 200 200 200 Accounts payable 35,000 35,000 35,000 Note payable 40,000 40,000 40,000 Unearned rent revenue 1,000 (4) 250 750 750 Salaries payable - (5) 5,500 5,500 5,500 Interest payable - (6) 333 333 333 Common stock 60,000 60,000 60,000 Retained earnings 1,000 1,000 1,000 Sales revenue 38,500 38,500 38,500 Rent revenue - (4) 250 250 250 Cost of goods sold 22,000 22,000 22,000 Salaries expense 5,000 (5) 5,500 10,500 10,500 Supplies expense - (1) 800 800 800 Rent expense - (2) 2,000 2,000 2,000 Depreciation expense - (3) 200 200 200 Interest expense - (6) 333 333 333 Bad debt expense - (7) 500 500 500 Totals 174,500 174,500 9,583 9,583 181,033 181,033
Net income 2,417 2,417 Totals 38,750 38,750 144,700 144,700
Balance Sheet
Worksheet, Dress Right Clothing Corporation, July 2006Unadjusted Trial
Balance Adjusting Entries Adjusted Trial
Balance Income Statement
2-78
Reversing Entries
Reversing entries remove the effects of some of the adjusting entries made at the end of the
previous reporting period for the sole purpose of simplifying journal entries made during the new
period. Reversing entries are optional and are used most often with accruals.
Let’s consider the following accrual adjusting entry made by Dress Right.
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Reversing Entries
If reversing entries are not used, when salaries actually are paid in August, the accountant needs to remember to debit
salaries payable and not salaries expense.
Bal. 7/31 10,500
Bal. 10,500
Salaries Expense5,500 Bal. 7/31
Payment 5,500 - Bal.
Salaries Payable
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Reversing Entries
If reversing entries are used, the following reversing entry is made on August 1, 2006. This entry reduces the salaries payable account to zero and reduces the salaries expense
account by $5,500.
Bal. 7/31 10,500 5,500 Reverse
Bal. 5,000
Salaries Expense5,500 Bal. 7/31
Reverse 5,500 - Bal.
Salaries Payable
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Reversing Entries
When salaries actually are paid in August, the debit is to salaries expense, thus increasing the account by $5,500. We can see that the ending balances in the accounts are
identical whether or not reversing entries are used.
Bal. 7/31 10,500 Payment 5,500 5,500 ReverseBal. 10,500
Salaries Expense5,500 Bal. 7/31
Reverse 5,500 - Bal.
Salaries Payable
2-83
Subsidiary Ledgers
Subsidiary ledgers contain a group of subsidiary accounts associated with particular general ledger control accounts. Subsidiary ledgers are commonly
used for accounts receivable, accounts payable, plant and equipment, and investments.
For example, there will be a subsidiary ledger for accounts receivable that keeps
track of the increases and decreases in the accounts receivable balance for each of the
company’s customers purchasing goods and services on credit.
After all of the postings are made from the appropriate journals, the balance in the accounts receivable control account should equal the sum of
the balances in the accounts receivable subsidiary ledger accounts.
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Special Journals
Special journals are used to capture the dual effect of repetitive types of transactions in
debit/credit form.
Special journals simplify the recording process in the following ways:
1. Journalizing the effects of a particular transaction is made more efficient through the use of specifically designed formats.
2. Individual transactions are not posted to the general ledger accounts but are accumulated in the special journals and a summary posting is made on a periodic basis.
3. The responsibility for recording journal entries for the repetitive types of transactions is placed on individuals who have specialized training in handling them.
Let’s look at some special journals.
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Sales Journal
Sales journals record all credit sales. Every entry in the sales journal has the same effect on the accounts; the sales revenue account
is credited and the accounts receivable control account is debited.
SALES JOURNAL Page 1
Accounts Receivable Subsidiary
Account No. Customer Name
Sales Invoice Number
Cr. Sales Revenue (400)Dr. Accounts
Receivable (110)
Aug. 5 801 Leland High School 10-221 1,500
9 812 Mr. John Smith 10-222 200
18 813 Greystone School 10-223 825
22 803 Ms. Barbara Jones 10-224 120
29 805 Hart Middle School 10-225 650
3,295
Date
2006
Other columns capture
information needed for
updating the accounts
receivable subsidiary
ledger.
2-86
Sales Journal
SALES JOURNAL Page 1
Accounts Receivable Subsidiary
Account No. Customer Name
Sales Invoice Number
Cr. Sales Revenue (400)Dr. Accounts
Receivable (110)
Aug. 5 801 Leland High School 10-221 1,500
9 812 Mr. John Smith 10-222 200
18 813 Greystone School 10-223 825
22 803 Ms. Barbara Jones 10-224 120
29 805 Hart Middle School 10-225 650
3,295
Date
2006
Bal. 7/31 2,000 Aug. 31 SJ1 3,295 Bal. 5,295
Accounts Receivable- Beg. bal.
3,295 Aug. 31 SJ13,295 Bal.
Sales Revenue
Aug. 5 SJ1 1,500
Bal. 1,500
Leland High School 801
Accounts Receivable Subsidiary Ledger
2-87
Cash Receipts Journal
Cash receipts journals record all cash receipts, regardless of the source. Every
entry in the cash receipts journal produces a debit to the cash account with the credit to
various other accounts.CASH RECEIPTS JOURNAL Page 1
DateExplanation or Account Name
Dr. Cash (100)
Cr. Accounts
Receivable (110)
Cr. Sales
Revenue (400)
Cr. Other
Other Accounts
Aug. 7 Cash sale 500 500
11 Borrowed cash 10,000 10,000
Notes payable
(220)
17 Leland High School 750 750
20 Cash sale 300 300
25 Mr. John Smith 200 200
11,750 950 800 10,000
2006
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Cash Receipts Journal
Aug. 5 SJ1 1,500 750 Aug. 17 CR1
Bal. 750
Leland High School 801
Accounts Receivable Subsidiary Ledger
CASH RECEIPTS JOURNAL Page 1
DateExplanation or Account Name
Dr. Cash (100)
Cr. Accounts
Receivable (110)
Cr. Sales
Revenue (400)
Cr. Other
Other Accounts
Aug. 7 Cash sale 500 500
11 Borrowed cash 10,000 10,000
Notes payable
(220)
17 Leland High School 750 750
20 Cash sale 300 300
25 Mr. John Smith 200 200
11,750 950 800 10,000
2006