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- 1. Chapter 3-1 Impact of Adjusted EntriesImpact of Adjusted Entries by Group 1by Group 1 Fernando Casco-Downing, KatieFernando Casco-Downing, Katie Fleming, Michael Kubik, EmilyFleming, Michael Kubik, Emily Stone, Fei WangStone, Fei Wang
- 2. Chapter 3-2 IntroductionIntroduction Accounting Equation (A= L + SE)Accounting Equation (A= L + SE) Accounting CycleAccounting Cycle Accounting ConceptsAccounting Concepts RevenueRevenue ExpenseExpense Revenue RecognitionRevenue Recognition Matching PrincipleMatching Principle Types of Adjusted EntriesTypes of Adjusted Entries Examples of Adjusted EntriesExamples of Adjusted Entries Impact without entriesImpact without entries
- 3. Chapter 3-3 The Accounting EquationThe Accounting EquationThe Accounting EquationThe Accounting Equation Relationship among the assets, liabilities andRelationship among the assets, liabilities and stockholders’ equity of a business:stockholders’ equity of a business: The equation must be in balance after everyThe equation must be in balance after every transaction. For everytransaction. For every DebitDebit there must be athere must be a CreditCredit.. Illustration 3-3
- 4. Chapter 3-4 The Accounting CycleThe Accounting CycleThe Accounting CycleThe Accounting Cycle TransactionsTransactions 1. Journalization1. Journalization 6. Financial Statements6. Financial Statements 7. Closing entries7. Closing entries 8. Post-closing trail balance8. Post-closing trail balance 9. Reversing entries9. Reversing entries 3. Trial balance3. Trial balance 2. Posting2. Posting 5. Adjusted trial balance5. Adjusted trial balance 4. Adjustments4. AdjustmentsWork Sheet Work Sheet Illustration 3-6
- 5. Chapter 3-5 Adjusting EntriesAdjusting EntriesAdjusting EntriesAdjusting Entries RevenuesRevenues - recorded in the period in which they- recorded in the period in which they are earnedare earned. ExpensesExpenses - recognized in the period in which they- recognized in the period in which they are incurredare incurred. Adjusting entriesAdjusting entries - needed to ensure that the- needed to ensure that the revenue recognitionrevenue recognition andand matching principlesmatching principles areare followed.followed.
- 6. Chapter 3-6 Types of Adjusting EntriesTypes of Adjusting EntriesTypes of Adjusting EntriesTypes of Adjusting Entries 1. Prepaid Expenses. Expenses paid in cash and recorded as assets before they are used or consumed. Prepayments 3. Accrued Revenues. Revenues earned but not yet received in cash or recorded. 4. Accrued Expenses. Expenses incurred but not yet paid in cash or recorded. 2. Unearned Revenues. Revenues received in cash and recorded as liabilities before they are earned. Accruals Illustration 3-20
- 7. Chapter 3-7 Expedient Recording MethodExpedient Recording Method ExpedientExpedient Records anRecords an expenseexpense upon payment of cashupon payment of cash before goods or services are consumedbefore goods or services are consumed RecordsRecords revenuerevenue upon receipt of cashupon receipt of cash before goods or services are providedbefore goods or services are provided
- 8. Chapter 3-8 Debit Credit Service Revenue 45,00045,000 Debit Credit Cash 45,00045,000 45,00045,000 Expedient General EntriesExpedient General EntriesExpedient General EntriesExpedient General Entries Q1 : On December 1, 2011, Johnson received a $45,000 payment for services to be rendered equally over a four-month period. Service revenue was credited. Service revenue 45,000 Cash 45,000Dec. 1 45,00045,000
- 9. Chapter 3-9 Debit Credit Service Revenue 33,75033,750 33,75033,750 Debit Credit Unearned Service Revenue 45,00045,000 11,25011,250 Adjusting Entries for “Unearned Revenues”Adjusting Entries for “Unearned Revenues”Adjusting Entries for “Unearned Revenues”Adjusting Entries for “Unearned Revenues” Q1 : On December 1, 2011, Johnson received a $45,000 payment for services to be rendered equally over a four-month period. Service revenue was credited. Unearned service revenue 33,750 Service revenue 33,750Dec. 31 33,75033,750 (=45,000-45,000/4)
- 10. Chapter 3-10 Q1 : On December 1, 2011, Johnson received a $45,000 payment for services to be rendered equally over a four-month period. Service revenue was credited. Unearned service revenue (L) 33,750 Service revenue (SE) 33,750Dec. 31 (=45,000-45,000/4) Impact Without Adjusted EntriesImpact Without Adjusted Entries Total Assets Total Liab. Stk. Equity Net Income Retained Earning None Understate 33750 Overstate 33750 Overstate 33750 Overstate 33750
- 11. Chapter 3-11 Standard Recording MethodStandard Recording Method StandardStandard AssetAsset upon payment of cashupon payment of cash LiabilityLiability upon receipt of cashupon receipt of cash before goods or services arebefore goods or services are providedprovided
- 12. Chapter 3-12 Debit Credit Unearned Service Revenue 45,00045,000 Debit Credit Cash 45,00045,000 45,00045,000 Standard General EntriesStandard General EntriesStandard General EntriesStandard General Entries Q1 : On December 1, 2011, Johnson received a $45,000 payment for services to be rendered equally over a four-month period. Unearned service revenue 45,000 Cash 45,000Dec. 1 45,00045,000
- 13. Chapter 3-13 Debit Credit Service Revenue 45,00045,000 Debit Credit Unearned Service Revenue 11,25011,250 11,25011,250 Adjusting Entries for “Unearned Revenues”Adjusting Entries for “Unearned Revenues”Adjusting Entries for “Unearned Revenues”Adjusting Entries for “Unearned Revenues” Q1 : On December 1, 2011, Johnson received a $45,000 payment for services to be rendered equally over a four-month period. Service revenue 11,250 Unearned service revenue 11,250Dec. 31 33,75033,750 11,25011,250
- 14. Chapter 3-14 Expedient Vs. GeneralExpedient Vs. General ExpedientExpedient GeneralGeneral Debit Credit Service Revenue 33,75033,750 33,75033,750 Debit Credit Unearned Service Revenue 45,00045,000 11,25011,250 33,75033,750 Debit Credit Service Revenue 45,00045,000 Debit Credit Unearned Service Revenue 11,25011,250 11,25011,250 33,75033,750 11,25011,250
- 15. Chapter 3-15 Q2. On December 31, 2011, the company paid a local radio station $16,000 for 40 radio ads that were to be aired, 20 per month, throughout January and February of 2012. Prepaid advertising was debited. Cash 16,000 Prepaid Advertising 16,000Dec. 31 Debit Credit Prepaid Advertising 16,00016,000 16,00016,000 Debit Credit Cash Adjusting Entries for “Prepaid Expenses”Adjusting Entries for “Prepaid Expenses”Adjusting Entries for “Prepaid Expenses”Adjusting Entries for “Prepaid Expenses” 16,00016,000
- 16. Chapter 3-16 Salaries payable 8,400 Salaries expense 8,400Dec. 31 Debit Credit Salaries Expense 8,4008,400 8,4008,400 Debit Credit Salaries Payable Adjusting Entries for “Accrued Expenses”Adjusting Entries for “Accrued Expenses”Adjusting Entries for “Accrued Expenses”Adjusting Entries for “Accrued Expenses” Q3. Employee salaries for the month of December 2011 totaling $8,400 will be paid on January 5, 2012. 8,4008,400
- 17. Chapter 3-17 Salaries payable(L) 8,400 Salaries expense(SE) 8,400Dec. 31 Adjusting Entries for “Accrued Expenses”Adjusting Entries for “Accrued Expenses”Adjusting Entries for “Accrued Expenses”Adjusting Entries for “Accrued Expenses” Q3. Employee salaries for the month of December 2011 totaling $8,400 will be paid on January 5, 2012. Total Assets Total Liab. Stk. Equity Net Income Retained Earning None Understate 8400 Overstate 8400 Overstate 8400 Overstate 8400
- 18. Chapter 3-18 Interest payable 900 Interest expense 900Dec. 31 Debit Credit Interest Expense 900900 900900 Debit Credit Interest Payable Adjusting Entries for “Accrued Expenses”Adjusting Entries for “Accrued Expenses”Adjusting Entries for “Accrued Expenses”Adjusting Entries for “Accrued Expenses” Q4. On September 31, 2011, Johnson Corp. borrowed $60,000 from a local bank. A note was signed with principal and 6% interest to be paid on September 1, 2012. (Interest = 60,000 * 6% /12 *3)
- 19. Chapter 3-19 Interest payable(L) 900 Interest expense(SE) 900Dec. 31 Adjusting Entries for “Accrued Expenses”Adjusting Entries for “Accrued Expenses”Adjusting Entries for “Accrued Expenses”Adjusting Entries for “Accrued Expenses” Q4. On September 31, 2011, Johnson Corp. borrowed $60,000 from a local bank. A note was signed with principal and 6% interest to be paid on September 1, 2012. (Interest = 60,000 * 6% /12 *3) Total Assets Total Liab. Stk. Equity Net Income Retained Earning None Understate 900 Overstate 900 Overstate 900 Overstate 900
- 20. Chapter 3-20 Allowance for Doubtful Accounts 8,000 Bad Debt Expense 8,000Dec. 31 Debit Credit Bad Debt Expense 8,0008,000 8,0008,000 Debit Credit Allowance for Doubtful Accounts Adjusting Entries for “Accrued Expenses”Adjusting Entries for “Accrued Expenses”Adjusting Entries for “Accrued Expenses”Adjusting Entries for “Accrued Expenses” Q5. On December 31, 2011, it was determined that $8,000 of the recorded Accounts receivable would prove to be uncollectible.
- 21. Chapter 3-21 Impact Without Adjusted EntriesImpact Without Adjusted Entries Total Assets Total Liab. Stk. Equity Net Income Retained Earning Overstated 8000 None Overstated 8000 Overstated 8000 Overstated 8000 Q5. On December 31, 2011, it was determined that $8,000 of the recorded Accounts receivable would prove to be uncollectible. Allowance for Doubtful Account (A) 8,000 Bad Debt Expense (SE) 8,000Dec. 31
- 22. Chapter 3-22 Impact Without Adjusted EntriesImpact Without Adjusted Entries Total Assets Total Liab. Stk. Equity Net Income Retained Earning Q1 None Understate 33750 Overstate 33750 Overstate 33750 Overstate 33750 Q2 None None None None None Q3 None Understate 8400 Overstate 8400 Overstate 8400 Overstate 8400 Q4 None Understate 900 Overstate 900 Overstate 900 Overstate 900 Q5 Overstated 8000 None Overstated 8000 Overstated 8000 Overstated 8000 Total Overstate 8000 Understate 43050 Overstate 51050 Overstate 51050 Overstate 51050
- 23. Chapter 3-23 ConclusionConclusion Accounting ConceptsAccounting Concepts Revenue and ExpenseRevenue and Expense Revenue Recognition and Matching PrincipleRevenue Recognition and Matching Principle Standard Vs.Standard Vs. ExpedientExpedient Recording MethodRecording Method Types of Adjusted EntriesTypes of Adjusted Entries Prepayments : Prepaid Expense and UnearnedPrepayments : Prepaid Expense and Unearned RevenueRevenue Accruals: Accrued Rev. and Accrued Exp.Accruals: Accrued Rev. and Accrued Exp. Impact without adjusted entriesImpact without adjusted entries Overstated A, L, SE, NI, REOverstated A, L, SE, NI, RE UnderstatedUnderstated A, L, SE, NI, REA, L, SE, NI, RE
Editor's Notes
- Fei
- Emily
- Michael
- F
- F
- Katie
- Katie
- Katie
- Katie
- Katie
- Katie
- Katie
- F
- Michael
- Michael
- Emily
- Emily
- Fei
- Fei
- Katie and Fei