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Nguyen ly ke toan

met
by

Pham Duong

on 22 September 2013

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Transcript of Nguyen ly ke toan

Notes
Ideas
Ideas
Ideas
Study objectives
ADJUSTING ENTRIES
Adjusted Trial Balance
An Adjusted Trial Balance
is taken after all adjusting entries are posted to verify the equality of debts and credits in the accounts.


Its purpose
is to prove the equality of debit balances and credit balances in the ledger.
Preparing Financial Statements
Measurement of net profit
Cash-Basis vs Accrual-Basis Accounting
Revenues
are recognized when earned, rather than when cash is received.
Expenses
are recognized when incurred, rather than when paid.
Transactions recorded in the periods in which the events occur.
Revenues
are recognized when cash is received.
Expenses
are recognized when cash is paid.
Cash-basis accounting is not in accordance with International Financial Reporting Standards (IFRS).
Companies recognize revenue in the accounting period in which it is earned.
In a service enterprise, revenue is considered to be earned at the time the service is performed.
Revenue Recognition Principle
Expense Recognition Principle – (Matching Principle)
Match expenses with revenues in the period when the company makes efforts to generate those revenues.
“Let the expenses follow the revenues.”

Adjusting entries
make it possible to report correct amounts on
the statement of financial position
and on
the income statement
.
A company must make adjusting entries every time it prepares financial statements.
Revenues
- recorded in the period in which they are earned.
Expenses
- recognized in the period in which they are incurred.
Adjusting entries
- needed to ensure that the
revenue recognition
and
expense recognition
are followed.
The Basics of Adjusting Entries
Deferrals
Accruals
2.
Unearned Revenues
.
Revenues received in cash and recorded as liabilities before they are earned.
1.
Prepaid Expenses
.
Expenses paid in cash and recorded as assets before they are used or consumed.
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.
Types of Adjusting Entries
Types of Adjusting Entries
Trial Balance – Illustrations are based on the October 31, trial balance of Pioneer Advertising Agency Inc.
Adjusting Entries for Deferrals
Deferrals
are either:
Prepaid expenses
OR

Unearned revenues
Depreciation
Buildings, equipment, and vehicles (long-lived assets) are recorded as assets, rather than an expense, in the year acquired.
Companies report a portion of the cost of a long-lived asset as an expense (depreciation) during each period of the asset’s useful life.
Summary
Adjusting Entries for “Prepaid Expenses”
Payment of cash that is recorded as an asset because service or benefit will be received in the future.
Cash Payment
BEFORE
Expense Recorded
Prepayments often occur in regard to:
rent
maintenance on equipment
fixed assets (depreciation)
insurance
supplies
advertising
Costs that expire either with the passage of time or through use.
Adjusting entries

(1) to record the expenses that apply to the current accounting period
, and
(2) to show the unexpired costs in the asset accounts
.
Prepaid Expenses
Adjusting entries for prepaid expenses
Increases (debits) an expense account and
Decreases (credits) an asset account.
Illustration 3-4
Illustration: Pioneer Advertising Agency purchased advertising supplies costing $2,500 on October 5. Pioneer recorded the payment by increasing (debiting) the asset Advertising Supplies. This account shows a balance of $2,500 in the October 31 trial balance. An inventory count at the close of business on October 31 reveals that $1,000 of supplies are still on hand.
Oct. 31
Advertising supplies expense
50
prepaid insurance
50
Advertising supplies expense
Advertising supplies
1,500
1,500
Illustration: On October 4, Pioneer Advertising Agency paid $600 for a one-year fire insurance policy. Coverage began on October 1. Pioneer recorded the payment by increasing (debiting) Prepaid Insurance. This account shows a balance of $600 in the
October 31 trial balance. Insurance of $50 ($600 / 12) expires each month.
Oct. 31
Illustration: Pioneer Advertising estimates depreciation on the office equipment to be $480 a year, or $40 per month.

Oct. 30
Depreciation expense
Accumulated depreciation
40
40
Depreciation

(Statement Presentation)
Accumulated Depreciation is a contra asset account.
Appears just after the account it offsets (Equipment) on the statement of financial position.
Adjusting Entries for “Accrued Expenses”
Adjusting Entries for “Accrued Expenses”

Accrued Expenses
An adjusting entry serves two purposes:
(1) It records the obligations, and
(2) It recognizes the expenses.

Adjusting Entries for “Accrued Expenses”
Illustration 3-21

Summary
Adjusting Entries for “Accrued Expenses”

Illustration 3-19

Illustration: Pioneer Advertising Agency last paid salaries on October 26; the next payment of salaries will not occur until November 9. The employees receive total salaries of $2,000 for a five-day work week, or $400 per day. Thus, accrued salaries at October 31 are $1,200 ($400 x 3 days).

Adjusting Entries for “Accrued Expenses”

Increases (debits) an expense account and
Increases (credits) a liability account.

Adjusting entries for accrued expenses

Adjusting Entries for “Accrued Expenses”

Illustration 3-20
Oct. 31

Salaries expense

Salaries payable

Illustration: Pioneer Advertising Agency last paid salaries on October 26; the next payment of salaries will not occur until November 9. The employees receive total salaries of $2,000 for a five-day work week, or $400 per day. Thus, accrued salaries at October 31 are $1,200 ($400 x 3 days).

Adjusting Entries for “Accrued Expenses”

Illustration 3-17
Oct. 31

Interest expense

Interest payable

Illustration: Pioneer Advertising Agency signed a three-month note payable in the amount of $5,000 on October 1. The note requires Pioneer to pay interest at an annual rate of 12%.

Adjusting entry results in:

taxes
salaries

Expense Recorded
Cash Payment
Accrued expenses often occur in regard to:

BEFORE

rent
interest

Adjusting Entries for “Accrued Expenses”

Expenses incurred but not yet paid in cash or recorded.

50
50
1200
1200

Normally, the changes in owner’s equity during the period are disclosed as follows in a schedule called a statement of owner’s equity:

STARR REAL ESTATE OFFICE
Statement of Owner’s equity
For the month ended 30 June 19x1
 
Brian Starr, Capital _ 1 June 19x1 $60 000
Add: Net profit for the month of June 1 238
= 61 238
Less Drawings during June 600
Brian Starr, Capital _ 30 June 19x1 = $60 638

Non-current assets

Assets
Current assets
Non-current assets
Long-term investments
Property, plant and equipment
Non-current liabilities
Balance sheet
The profit and loss statement normally is prepared before the balance sheet because the net profit or net loss is needed to complete the owner’s equity section of the balance sheet.
Profit and loss statements
The owner’s equity section of the balance sheet reports the equity of the owner in the assets of the entity.
Owner’s equity is increased by the withdrawal of assets and the incurrence of a net loss for the period.

Owner’s equity

Long-term liabilities

Obligations due to be paid
or settled within one year
or the operating cycle
whichever is longer
Current liabilities

Current assets

Inventory is sold on account
Inventory
Accounts receivable
Inventory is purchased on credit

Cash at bank
Accounts recievable are collected
Liabilities
Current liabilities
Non-current liabilities
Long-term investments
Property, plant and equipment
Intangible assets
Other assets
Obligations not due within
one year or the operating
cycle, whichever is longer
8. Understand the meaning of the operating cycle.
Financial Accounting
Group 3:
1. Nguyễn Thị Hoài Anh
2. Phạm Quỳnh Linh Dương
3. Nguyễn Thị Thúy Hà
4. Trần Ánh Nguyệt
5. Nguyễn Mai Phương
Chapter 3:
Adjusting the accounts and preparing financial statements

THANK'S FOR LISTEN
?
Time for question

1/6
60000
$142030
$142030
Electricity expense
Net profit
210
$1238
To
fig.3.8
9012
8
1. Understand the difference between the cash and the accrual basis of measuring net profit.
2. Explain the reasons for adjusting entries.
3. Identify the major types of adjusting entries.
4. Prepare adjusting entries for prepaid.
5. Prepare adjusting entries for accruals.
6. Prepare and understand the purpose of an adjusted trial balance.
7. Prepare financial statements from an adjusted trial balance.
Types of Adjusting Entries
FINANCIAL ACCOUNTING
Cash-Basis Accounting
Accrual-Basis Accounting
Full transcript