Accrued Expenses - WordPress.com · 2015. 5. 18. · Adjusting Entry: Examples: Summary Income...

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Accrued Expenses Affects 3 concepts: If not adjusted, error in… Adjusting Entry: Examples: o = 3,000,000 .18 30 365 o = 300,000 .20 30 365 Accrued Income Affects 3 concepts: If not adjusted, error in… Adjusting Entry: Examples:

Transcript of Accrued Expenses - WordPress.com · 2015. 5. 18. · Adjusting Entry: Examples: Summary Income...

  • Accrued Expenses

    Affects 3 concepts:

    If not adjusted, error in…

    Adjusting Entry:

    Examples:

    o 𝐼 = 𝑃 3,000,000 𝑥 .18 𝑥 30

    365

    o 𝐼 = 𝑃 300,000 𝑥 .20 𝑥 30

    365

    Accrued Income

    Affects 3 concepts:

    If not adjusted, error in…

    Adjusting Entry:

    Examples:

  • Prepaid Expenses (Pre-collections)

    Affects 3 concepts:

    Expense Method

    If not adjusted

    Adjusting Entry:

    Examples:

    ►

    ►

    ►

    Total Amount

    (P 92,000)

    Unused [Asset]

    (P 48,000)

    Used [Expense]

    (P 44,000)

    Total Amount

    (P 3,000)

    Unused [Asset]

    (P 2,000)

    Used [Expense]

    (P 1,000)

  • ►

    ►

    𝑃28,000 𝑥 11 𝑚𝑜𝑛𝑡ℎ𝑠

    12 𝑚𝑜𝑛𝑡ℎ𝑠= 𝑃25,67 𝑝𝑒𝑟 𝑚𝑜𝑛𝑡ℎ

    ►

    ►

    Asset Method

    If not adjusted

    Adjusting Entry:

    Examples:

    Total Amount

    (P 28,000)

    Unused [Asset]

    (P 25,667)

    Used [Expense]

    (P 2,333)

  • ►

    ►

    ►

    ►

    ►

    𝑃28,000 𝑥 11 𝑚𝑜𝑛𝑡ℎ𝑠

    12 𝑚𝑜𝑛𝑡ℎ𝑠= 𝑃25,67 𝑝𝑒𝑟 𝑚𝑜𝑛𝑡ℎ

    ►

    ►

    Total Amount

    (P 92,000)

    Unused [Asset]

    (P 48,000)

    Used [Expense]

    (P 44,000)

    Total Amount

    (P 3,000)

    Unused [Asset]

    (P 2,000)

    Used [Expense]

    (P 1,000)

    Total Amount

    (P 28,000)

    Unused [Asset]

    (P 25,667)

    Used [Expense]

    (P 2,333)

  • Summary:

    Expense Method

    Asset Method

    Unearned Income (Deferred Income)

    Affects 3 concepts:

    Income Method

    If not adjusted

    Adjusting Entry:

    Examples:

    ►

    ►

    ►

    ►

    Liability Method

    If not adjusted

    Cash Collected

    (P 200,000)

    Unearned [Liability]

    (P 144,000)

    Earned [Income]

    (P 56,000)

  • Adjusting Entry:

    Examples:

    ►

    ►

    Summary

    Income Method

    Liability Method

    Depreciation

    o

    Matching Principle

    Acquisition Cost

    3 Factors Involved in Computing Depreciation

    Straight-line Method

    𝐴𝑛𝑛𝑢𝑎𝑙 𝑑𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛 = 𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑏𝑙𝑒 𝐶𝑜𝑠𝑡 – 𝑅𝑒𝑠𝑖𝑑𝑢𝑎𝑙 𝑉𝑎𝑙𝑢𝑒

    𝐸𝑠𝑡𝑖𝑚𝑎𝑡𝑒𝑑 𝑈𝑠𝑒𝑓𝑢𝑙 𝐿𝑖𝑓𝑒

    Cash Collected

    (P 200,000)

    Unearned [Liability]

    (P 144,000)

    Earned [Income]

    (P 56,000)

  • Recording Depreciation Expense

    o

    Examples:

    o

    o

    ►

    𝑃250,000 − 𝑃50,000

    10 𝑦𝑒𝑎𝑟𝑠

    = 𝑃20,000 𝑦𝑒𝑎𝑟⁄

    ►

    Computation of the Carrying Value of an Asset

    o

    Bad Debts

    Why Sell on Credit?

    Direct Write-off Method

    Allowance Method

    Pro-forma Entry

    Percentage of Receivables Approach

  • Example – with no beginning balance

    Example – with beginning balance

    o

    Other Account Titles


ACCRUED - Washington, D.C.

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