Show the appropriate adjusting entries at the end of
accounting period.
Rental earned (Oct & Nov 2005) : 2 months x RM200 = RM400
Rental received in advance (Jan 2006) : 1 month x RM200 = RM200
The different types of adjustments that should be made in the preparation of final accounts are given and how the how the adjustment should be treated.
The different types of adjustments that should be made in the preparation of final accounts are given and how the how the adjustment should be treated.
Bad debts and Provision for Bad debts. Bad Debts. When the firm finds that it is impossible to collect a debt, that debt should be written off as a bad debt.
Provisions in Accounting & Prepaid ExpensesDeepak Soni
Accrual-basis accounting is a concept in which expenses are recorded when incurred, not when amount is paid.
1. ACCRUALS / PROVISIONS: All expenses incurred to generate revenues must be recognized in the same period as the related revenues.
A provision is an amount that you put in aside in your accounts to cover a future liability.
2. PREPAID: A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received in the near future.
Edexcel IGCSE & O Level
Accounting
Correction of errors
Situations where errors occur
Two types of errors
Trial Balance
Errors which do not affect Trial Balance agreement
Omission, Commission, Original Entry, Principal, Compensation, Complete Reversal, Duplication
Errors which affect the agreement of trial balance
suspense account
All igcse past papers
model questions
Control accounts the account which represents a particular sub ledger, sales ledger and purchases ledger control accounts.
At the end of an accounting period the accounts are balanced off and a trial balance prepared to check the accuracy of the book keeping entries. If a trial balance fails to balance this usually indicates that an error or errors may have been made and needs to be identified. As the business expands the accounting requirements increase which may lead to more errors occurring which are very difficult to find.
The Cash Flow Statement translates earnings in the Income Statement into cash inflows. Explained in detail above as a part of the topic “Financial accounting”, is brought to you by Welingkar’s Distance Learning Division.
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Trial balance and rectification of errorsItisha Sharma
Trial balance and rectification of errors, Introduction- Specimen of a Trial Balance- Errors and their rectification – Rectification of errors Rectification of errors detected after the preparation of Trial Balance but before the preparation of Final Accounts- Effect of errors on Profit – Rectification of errors appearing after the preparation of Final Accounts
Bad debts and Provision for Bad debts. Bad Debts. When the firm finds that it is impossible to collect a debt, that debt should be written off as a bad debt.
Provisions in Accounting & Prepaid ExpensesDeepak Soni
Accrual-basis accounting is a concept in which expenses are recorded when incurred, not when amount is paid.
1. ACCRUALS / PROVISIONS: All expenses incurred to generate revenues must be recognized in the same period as the related revenues.
A provision is an amount that you put in aside in your accounts to cover a future liability.
2. PREPAID: A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received in the near future.
Edexcel IGCSE & O Level
Accounting
Correction of errors
Situations where errors occur
Two types of errors
Trial Balance
Errors which do not affect Trial Balance agreement
Omission, Commission, Original Entry, Principal, Compensation, Complete Reversal, Duplication
Errors which affect the agreement of trial balance
suspense account
All igcse past papers
model questions
Control accounts the account which represents a particular sub ledger, sales ledger and purchases ledger control accounts.
At the end of an accounting period the accounts are balanced off and a trial balance prepared to check the accuracy of the book keeping entries. If a trial balance fails to balance this usually indicates that an error or errors may have been made and needs to be identified. As the business expands the accounting requirements increase which may lead to more errors occurring which are very difficult to find.
The Cash Flow Statement translates earnings in the Income Statement into cash inflows. Explained in detail above as a part of the topic “Financial accounting”, is brought to you by Welingkar’s Distance Learning Division.
For more such innovative content on management studies, join WeSchool PGDM-DLP Program: http://bit.ly/SlideshareFaccounting
Join us on Facebook: http://www.facebook.com/welearnindia
Follow us on Twitter: https://twitter.com/WeLearnIndia
Read our latest blog at: http://welearnindia.wordpress.com
Subscribe to our Slideshare Channel: http://www.slideshare.net/welingkarDLP
Trial balance and rectification of errorsItisha Sharma
Trial balance and rectification of errors, Introduction- Specimen of a Trial Balance- Errors and their rectification – Rectification of errors Rectification of errors detected after the preparation of Trial Balance but before the preparation of Final Accounts- Effect of errors on Profit – Rectification of errors appearing after the preparation of Final Accounts
Skysong Co. has the following defined benefit pension plan balances .docxjennifer822
Skysong Co. has the following defined benefit pension plan balances on January 1, 2020.
Projected benefit obligation$4,619,000Fair value of plan assets4,619,000
The interest (settlement) rate applicable to the plan is 10%. On January 1, 2021, the company amends its pension agreement so that prior service costs of $595,000 are created. Other data related to the pension plan are:
20202021
Service cost$151,000$169,000Prior service cost amortization089,000Contributions (funding) to the plan201,000186,000Benefits paid220,000283,000Actual return on plan assets253,000347,000Expected rate of return on assets6%8%Prepare a pension worksheet for the pension plan in 2020.
(Enter all amounts as positive.)
SKYSONG
COMPANY
Pension Worksheet—2020
General Journal Entries
Memo Record
Items
Annual Pension
ExpenseCashOCI—Prior
Service CostOCI— Gain/
LossPension Asset/
Liability
Projected Benefit
ObligationPlan
Assets
Balance, Jan. 1, 2020$ Dr.Cr. $ Dr.Cr. $ Dr.Cr. $ Dr.Cr. $ Dr.Cr. $ Dr.Cr. $ Dr.Cr. Service cost Dr.Cr. Dr.Cr. Dr.Cr. Dr.Cr. Dr.Cr. Dr.Cr. Dr.Cr. Interest cost Dr.Cr. Dr.Cr. Dr.Cr. Dr.Cr. Dr.Cr. Dr.Cr. Dr.Cr. Actual return Dr.Cr. Dr.Cr. Dr.Cr. Dr.Cr. Dr.Cr. Dr.Cr. Dr.Cr. Unexpected loss Dr.Cr. Dr.Cr. Dr.Cr. Dr.Cr. Dr.Cr. Dr.Cr. Dr.Cr. Contributions Dr.Cr. Dr.Cr. Dr.Cr. Dr.Cr. Dr.Cr. Dr.Cr. Dr.Cr. Benefits Dr.Cr. Dr.Cr. Dr.Cr. Dr.Cr. Dr.Cr. Dr.Cr. Dr.Cr. Journal entry for 2020$ Dr.Cr. $ Dr.Cr. Dr.Cr. Dr.Cr. Dr.Cr. Dr.Cr. Dr.Cr. Accumulated OCI Dec. 31, 2019 Dr.Cr. Dr.Cr. Dr.Cr. Dr.Cr. Dr.Cr. Balance, Dec. 31, 2020$ Dr.Cr. $ Dr.Cr. $ Dr.Cr. $ Dr.Cr. $ Dr.Cr.
eTextbook and Media
List of Accounts
Prepare any journal entries related to the pension plan that would be needed at December 31, 2020.
(Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
DateAccount Titles and ExplanationDebitCredit
Dec. 31, 2020
eTextbook and Media
List of Accounts
Prepare a pension worksheet for 2021.
(Enter all amounts as positive.)
SKYSONG
COMPANY
Pension Worksheet—2020 and 2021General Journal EntriesMemo RecordItemsAnnual Pension
ExpenseCashOCI—Prior
Service CostOCI— Gain/
LossPension Asset/
LiabilityProjected Benefit
ObligationPlan
Assets
Balance, Jan. 1, 2020$4,619,000Cr.$4,619,000Dr.Service cost$151,000Dr.151,000Cr.Interest cost461,900Dr.461,900Cr.Actual return253,000Cr.253,000Dr.Unexpected loss24,140Dr.$24,140Dr.Contributions$201,000Cr.201,000Dr.Benefits220,000Dr.220,000Cr.Journal entry for 2020$335,760Dr.$201,000Cr.24,140Dr.$158,900Cr.Accumulated OCI Dec. 31, 20190Balance, Dec. 31, 2020$24,140Dr.$158,900Cr.5,011,900Cr.4,853,000Dr.Additional PSC, 1/1/2021 Dr.Cr. Dr.Cr.$ Dr.Cr. Dr.Cr. .
2. LEARNING OBJECTIVES
To make adjustments for accrued &
prepaid expenses
To make adjustments for revenues owing
& revenues received in advance
To ascertain the actual amount of
expense & revenues in the Profit & Loss
Account
To show the recording of accruals &
prepayments in the Balance Sheet
3. INTRODUCTION
In the trial balance, as far as expenses are
concerned, it records only the expenses paid for
the period.
So do the revenues where it records only the
revenues received during the period.
Therefore, adjusting entries are made at the end of
the accounting period to ensure that revenues are
recorded in the period in which they are earned, &
expenses are recognized in the period which they
are incurred.
This is to get the correct figure for net profit during
the period.
4. TYPES OF ADJUSTING ENTRIES FOR NOMINAL
ACCOUNTS
Revenues & expenses - Before making adjustments,
accounts are considered as one must observed the
nominal accounts. Adjusting following:
entries for nominal accounts • The accounting period
can be classified into the
• Any balances b/d at the
following categories:
beginning of the year
Expenses Revenues • Any balances b/d at the
Prepaid Revenues end of the year
expenses or received in • Amount actually paid
expenses paid advance or
during the year
in advance unearned
revenues • Amount actually charged
to the TPL accounts during
Accrued Accrued
expenses or revenues or the year
expenses owing revenues
owing
5. PREPAID EXPENSES
Prepaid expenses are Journal Entries:
payment of expenses Debit Credit
that will benefit more a) To record the Expenses Bank /
than one accounting expenses paid cash
period. b) To record the Expenses Expenses
Prepaid expenses often adjusting entries Prepaid
occur with regard to c) To transfer the Profit & Expenses
insurance, rent & expenses incurred Loss
during the year to
advertising. P&L a/c (closing
An asset-expense entries)
relationship exists with e) Balance for Expenses Expenses
prepaid expenses. prepaid expense Prepaid
should be
Prepaid expenses will be
transferred to the
treated as current asset insurance
in the Balance Sheet expense a/c.
6. PREPAID EXPENSES (cont’d)
Example
Dani Trading took a yearly insurance policy of RM600 on 1 June
2005. The accounting period ends 31 December each year. The
business has agreed to pay insurance premium at the rate of
RM200 every 4 month. Payment made are as follows:
Date of Payment Amount Month
Paid
1 June 2005 RM200 June 2005 to Sept.
2005
1 October 2005 RM200 Oct. 2005 to Jan. 2006
Show the appropriate adjusting entries on 31 December 2005
1 February 2006 RM200 Feb. 2006 to May 2006
Monthly insurance premium : RM600/12 = RM50
Insurance Expense : 1 June to 31 December
: 7 months x RM50 = RM350
Insurance Prepaid : 1 month x RM50 = RM50
7. PREPAID EXPENSES (cont’d)
Journal Entries:
Date Recording Process Debit Credit
2005 a) To record insurance expenses Insurance Bank
June 1 paid amount RM 200 Expense
Oct 1 b) To record insurance expenses Insurance Bank
paid amount RM 200 Expense
Dec 31 c) To record insurance prepaid Insurance Insurance
amount RM50 Prepaid Expense
Dec 31 d) To transfer insurance Profit & Insurance
expenses to P&L a/c Loss a/c Expense
amount RM 350
2006 e) Balance for prepaid expense Insurance Insurance
Jan 1 should be transferred to the Expense Prepaid
insurance expense a/c.
8. PREPAID EXPENSES (cont’d)
Insurance Expense
01/06/05 Bank 200 31/12/05 Insurance
Prepaid 50
01/10/05 Bank 200 31/12/05 Profit & Loss 350
400 400
01/01/06 Insurance Pre. 50
Insurance Prepaid
31/12/05 Insurance exp. 50 31/12/05 Balance c/d 50
01/01/06 Balance b/d 50 01/01/06 Insurance Exp. 50
Profit and Loss
Insurance Expense 350
Balance Sheet as at 31/12/05
Current Assets
Insurance Prepaid 50
9. ACCRUED EXPENSES
Accrued expenses
Journal Entries:
Debit Credit
are expenses
a) To record the Expenses Bank /
incurred but unpaid.
expenses paid cash
A liability-expense
b) To record the Expenses Accrued
relationship exists adjusting Expenses
with accrued entries
expenses. c) closing entries Profit & Expenses
Accrues expenses Loss
will be treated as d) Transfer the Accrued Expenses
current liability in the balance to the Expenses
credit side of
balance sheet.
the expense
a/c (opening
entries)
10. ACCRUED EXPENSES (cont’d)
Example
Dani Trading rent a stall on 1 October 2005 at the rate of RM100
per month payable at the end of each month. The accounting
period ends 31 December each year. Payment made are as
follows:
Date of Payment Amount Month
Paid
31 October 2005 RM100 October 2005
30 November 2005 RM100 November 2005
5 January 2006 RM100 December 2005
Rental for the month of December 2005 was only paid in January
2006. Show the appropriate adjusting entries at the end of
accounting period.
Rental paid ( Oct & Nov 2005) : 2 months x RM100 = RM200
Accrued Rental (Dec 2005) : 1 month x RM100 = RM100
11. ACCRUED EXPENSES (cont’d)
Journal Entries:
Date Recording Process Debit Credit
2005 a) To record rental paid amount Rent Bank
Oct 31 RM 100 Expenses
Nov 30 b) To record rental paid amount Rent Bank
RM 100 Expenses
Dec 31 c) To record accrued rental Rent Rent
amount RM100 Expenses Accrued
Dec 31 d) To transfer Rent Expenses to Profit & Rent
P&L a/c amount RM 300 Loss a/c Expenses
2006 e) Balance for accrued expense Rent Rent
Jan 1 should be transferred to the Accrued Expenses
Rent Expenses a/c.
12. ACCRUED EXPENSES (cont’d)
Rent Expense
31/10/05 Bank 100 31/12/05 Profit & Loss 300
30/11/05 Bank 100
31/12/05 Rent Accrued 100
300 300
01/01/06 Rent Accrued 100
Rent Accrued
31/12/05 Balance c/d 100 31/12/05 Rent Expense 100
01/01/06 Rent Expense 100 01/01/06 Balance b/d 100
Profit and Loss
Rent Expenses 300
Balance Sheet as at 31/12/05
Current Liabilities
Accrued Expenses 100
13. REVENUE RECEIVED IN ADVANCE
Also known as unearned Journal Entries:
revenue Debit Credit
Payment received for
a) To record the Bank / Revenue
services to be provided in payment cash Received
a future accounting received
period, revenue received
b) To record Revenue Revenue
in advance a/c should be revenue Received Received
credited. received in in
An adjusting entry is made advance advance
to record the revenue that c) Closing entries Revenue Profit &
has been earned & to Received Loss
show the liability that
d) Transfer the Revenue Revenue
remains.
balance to the Received Received
Revenue received in
credit side of the in
advance treated as revenue advance
current liabilities in the received
balance sheet. (opening entries)
14. REVENUE RECEIVED IN ADVANCE (cont’d)
Example
Dani Trading rent out part of its office on 1 October 2005
at a rental of RM200 per month & receivable at the end of
each month. The accounting period ends 31 December
each year. Rental received is as follows:
Date of Payment Amount Month
Paid
31 October 2005 RM200 October 2005
30 November 2005 RM200 November 2005
31 December 2005 RM400 Dec. 2005 & Jan. 2006
15. REVENUE RECEIVED IN ADVANCE (cont’d)
Journal Entries:
Date Recording Process Debit Credit
2005 a) To record Rent received amount Bank Rent
Oct 31 RM 200 Received
Nov 30 b) To record Rent received amount Bank Rent
RM 200 Received
Dec 31 c) To record Rent received amount Bank Rent
RM 400 Received
Dec 31 d) To record Rent received in Rent Rent
advance amount RM 200 Received Received in
advance
Dec 31 e) To transfer Rent received to P&L Rent Profit & Loss
a/c amount RM 300 Received a/c
2006 f) Balance for unearned revenue Rent Rent
Jan 1 should be transferred to the Received in Received
Revenue Received a/c. advance
16. REVENUE RECEIVED IN ADVANCE (cont’d)
Rent Received
31/10/05 Rent Received 200 31/10/05 Bank 200
in advance
31/12/05 Profit & Loss 600 30/11/05 Bank 200
31/12/05 Bank 400
800 800
01/01/06 Rent Received
in advance 200
Rent Received in Advance
31/12/05 Balance c/d 200 31/12/05 Rent Received 200
01/01/06 Rent Received 200 01/01/06 Balance b/d 200
Profit and Loss
Rent Received 600
Balance Sheet as at 31/12/05
Current Liabilities
Rent Received 200
in Advance
17. ACCRUED REVENUE
Revenues earned Journal Entries:
from services that Debit Credit
a) To record the Bank / Revenue
have been cash received cash Received
performed but
b) To record Accrued Revenue
neither billed nor Accrued Revenue Received
collected or Revenues
recorded. c) Closing entries Revenue Profit &
Accrued Revenue Received Loss
d) Transfer the Revenue Accrued
treated as current balance to the Received Revenue
assets in the debit side of the
balance sheet. revenue
received
(opening entries)
18. ACCRUED REVENUE (cont’d)
Example
Dani Trading rent out part of its office on 1 October 2005 at a
rental of RM200 per month & receivable at the end of each
month. The accounting period ends 31 December each year.
The rent received schedule is as follows:
Date of Payment Amount Month
Paid
31 October 2005 RM200 October 2005
30 November 2005 RM200 November 2005
10 January 2006 RM400 December 2005
19. ACCRUED REVENUE (cont’d)
Journal Entries:
Date Recording Process Debit Credit
2005 a) To record Rent received Bank Rent
Oct 31 amount RM 200 Received
Nov 30 b) To record Rent received Bank Rent
amount RM 200 Received
Dec 31 d) To record Rent accrued Rent Rent
amount RM 200 Accrued Received
Dec 31 e) To transfer Rent received to Rent Profit &
P&L a/c amount RM 600 Received Loss a/c
2006 e) Balance for accrued revenue Rent Rent
Jan 1 should be transferred to the Received Accrued
Revenue Received a/c.
20. ACCRUED REVENUE (cont’d)
Rent Received
31/12/05 Profit & Loss 600 31/10/05 Bank 200
30/11/05 Bank 200
31/12/05 Rent Accrued 200
600 600
01/01/06 Rent Accrued 200
Rent Accrued
31/12/05 Rent Received 200 31/12/05 Balance c/d 200
01/01/06 Balance b/d 200 01/01/06 Rent Received 200
Profit and Loss
Rent Received 600
Balance Sheet as at 31/12/05
Current Assets
Rent Accrued 200