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Adjusting the accounts
- 2. Presented By • Md. Tanvir Hossain – 161-15-7157 • Jakir Hossain – 161-15-7543 Team ‘NAMHIN’ Team Members
- 3. Introduction Adjusting entries are accounting journal entries that convert a company's accounting records to the accrual basis of accounting. An adjusting journal entry is typically made just prior to issuing a company's financial statements
- 4. • TIME PERIOD ASSUMPTION • REVENUE RECOGNITION PRINCIPLE • THE MATCHING PRINCIPLE • ACCRUAL BASIS OF ACCOUNTING • CASH BASIS OF ACCOUNTING Pre-requisite knowledge
- 5. TYPES OF ADJUSTING ENTRIES Prepayments Prepaid Expenses Unearned Revenues Accruals Accrued Revenues Accrued Expenses Estimates Depreciation
- 6. FORMULA TO CALCULATE INTEREST Face Value of Note Annual Interest Rate Time (in Terms of One Year) x x Interest $10,000 x 6% x 1/12 = $50 =
- 7. LET’S SEE AN EXAMPLE
- 8. On November 1, 2017, the account balances of Hamm Equipment Repair were as follows.
- 9. During November, the following summary transactions were completed. Nov. 8 Paid Tk.1,700 for salaries due employees, of which Tk.700 is for October salaries. 10 Received Tk.3,620 cash from customers on account. 12 Received Tk.3,100 cash for services performed in November. 15 Purchased equipment on account Tk.2,000. 17 Purchased supplies on account Tk.700. 20 Paid creditors on account Tk.2,700. 22 Paid November rent Tk.400. 25 Paid salaries Tk.1,700. 27 Performed services on account and billed customers for these services Tk.2,200. 29 Received Tk.600 from customers for future service.
- 10. Adjustment data consist of: • 1. Supplies on hand Tk.1,400. • 2. Accrued salaries payable Tk.350. • 3. Depreciation for the month is Tk.200. • 4.Services related to unearned service revenue of Tk.1,220 were performed.
- 11. Let’s Start ! General Journal Adjusting Journal Adjusting Trial Balance
- 12. No. Date Account Titles Reference Debit Credit 1. 2. 3. 4. 5. 6. 7. 8. 9. 10 Nov 8 Nov 10 Nov 12 Nov 15 Nov 17 Nov 20 Nov 22 Nov 25 Nov 27 Nov 29 Salaries Payable Salaries Expense Cash 700 1000 3620 3100 2000 700 2700 400 1700 2200 600 1700 3620 3100 2000 700 2700 400 1700 2200 600 Cash Account Receivable Cash Service revenue Equipment Account Payable Supplies Account payable Account payable Cash Rent expense Cash Salaries expense Cash Account Receivable Service revenue Cash Unearned service revenue Hamm Equipment Repair General Journal
- 13. Hamm Equipment Repair Adjusting Journal Number/Date Account Titles Ref. Debit Credit 1. 2. 3. 4. Supplies expense(2500-1400) Supplies 1100 350 200 1220 1100 350 200 1220 Salaries expense Salaries payable Depreciation expense Accumulated depreciation Unearned service revenue Service revenue
- 14. Hamm Equipment Repair Adjusting Trial Balance Account Debit Credit Cash Account Receivable Supplies Equipment(12000+2000) Accumulated Depreciation Account payable Unearned service revenue Salary payable Capital Service revenue Salaries expense Depreciation expense Supplies expense Rent expense Total 3220 2830 1400 1400 3050 200 1100 400 2200 2600 580 350 13950 6520 26200 26200