The Adjustment Process Accountants need to ensure that the statements they produce are: Up to Date,...
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Transcript of The Adjustment Process Accountants need to ensure that the statements they produce are: Up to Date,...
![Page 1: The Adjustment Process Accountants need to ensure that the statements they produce are: Up to Date, Accurate, Consistent Adjustments are necessary to.](https://reader034.fdocuments.net/reader034/viewer/2022051820/56649da35503460f94a8fd12/html5/thumbnails/1.jpg)
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The Adjustment ProcessAccountants need to ensure that the
statements they produce are:Up to Date, Accurate, Consistent
Adjustments are necessary to ensure
• Accounts are brought up to date
• All late transactions are taken into account
• All calculations are correct
• All GAAPs have been complied with
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The Adjustment ProcessDuring the course of the fiscal period, things
are allowed to get out of dateAdjusting entries get everything up-to-date
and accurate againWhy allowed to go inaccurate?
Saves time, money, effort
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The Adjustment ProcessWe will look at the adjusting entries for three
main areasSuppliesPrepaid Expenses Late Arriving Invoices
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Adjusting Entries
Adjustment #1: Supplies
The Supplies balance shows the total supplies purchased in the year
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What is the Balance?
What the balance is
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What Should The Balance Be?
What the balance should be?
What the balance “should be” is determined from someone counting the supplies that remain in the business at the end of the year
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The Adjustment
The required adjustment
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Introducing a New Account
What the balance is
The income statement account related to Supplies is shown above
The accounting clerk has not used this account during the year
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Expense: What Should the Balance Be?
What the balance should be
What the balance “should be” is equal to the amount of supplies “used up” during the year
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What the Adjustment Would Be
The required adjustment
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The adjusting entry as it would appear in the general journal
What that Looks Like in the Journal
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Adjusting Entries
The Prepaid Insurance balance shows the total cost of insurance bought in the year
Adjustment #2: Prepaid Expenses
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What is the Balance?
What the balance is
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What Should the Balance Be?
What the balance should be
What the balance “should be” is determined from someone calculating the portion of the insurance policy that is “unexpired” or “not used up yet, but paid for”
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How did you Get $1200?An Insurance policy was purchased on
September 1st for one year. The fiscal period expires Dec. 31.
As of Dec. 31, how many months of insurance have been used ?
- 4 months have been used
Each month costs:$1800 / 12mo. = $150
4 months have been used:$150*4 = $600
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The Adjustment
The required adjustment
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Introducing Your 2nd New Account
What the balance is
The income statement account related to Prepaid Insurance is shown above
The accounting clerk has not used this account during the year
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Expense: What Should the Balance Be?
What the balance should be
What the balance “should be” is the amount of the insurance policy that has expired at year’s end
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What the Adjustment Should Be?
The required adjustment
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What it Looks Like in the Journal
The adjusting entry for insurance as it would appear in the general journal
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Adjusting Entries
Adjustment #3: Late Arriving Invoices
The Accounts Payable balance does not include two invoices that arrived late
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Two late invoices have arrived$212 for the Telephone Bill$315 for the Utilities Bill
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What Should the Balance Be?
Simply Input the missing invoicesAnd calculate the adjusted balance
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Expense: What is the Balance?
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The Adjustments
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What that Looks Like in the Journal
The adjusting entry for late invoices as it would appear in the general journal
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The adjusting entries have brought balance sheet accounts up to date
Summary 1
Adjusting Entries—Summary
Balance Sheet
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And have recorded expenses in related accounts on the income statement
Summary 2Adjusting Entries—Summary
Balance Sheet Income Statement
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HomeworkPAGE 218 in text – Questions #1-2
STUDY! Quiz tomorrow on the worksheet & balance sheetA couple questions on today’s lesson