会计英语第六单元

UnitFour

AccountingCycle

(3)Adjustments

第一页，共二十九页。Objectives:1Explainhowthematchingconceptrelatestotheaccrualbasisofaccounting.2Explainwhyadjustmentsarenecessaryandlistthecharacteristicofadjustingentries.3Journalizeentriesforaccountsrequiringadjustment.4Summarizetheadjustmentprocessandprepareanadjustmenttrialbalance.第二页，共二十九页。一accountingperiod→cashbasis(receivedorpaid)accrualbasis(earnedorrelate):revenuerecognitionconcept→matchingprincipleGAAPrequiretheuseoftheaccrualbasis,smallservicebusinessesmayusethecashbasisbecausetheyhavefewreceivablesandpayables.第三页，共二十九页。Thematchingprinciplesupportsrecordingrevenuesandrelateexpensesinthesameperiod.二Attheendofanaccountingperiod,someaccountsintheledgerrequireupdating.Thejournalentriesthatbringtheaccountsuptogateattheendoftheaccountingperiodarecalledadjustingentries.第四页，共二十九页。三Fourtypicaladjustingentries:Deferrals---------arecreatedbyrecordingatransactioninawaythatdelaysordeferstherecognitionofanexpenseorarevenue.㈠Deferredexpenses(prepaidexpenses)→becomeexpenseovertime

第五页，共二十九页。(1)supplies

(2)

prepaidinsurance(3)prepaidadvertising(4)prepaidinterest㈡Deferredrevenues(unearnedrevenue)→becomerevenuesovertime

第六页，共二十九页。(1)unearnedrent(2)tuition(3)annualretailerfee(4)premium(5)magazinesubscriptionsAccruals---------arecreatedbyanunrecordedexpensethathasbeenincurredoranunrecordedrevenuethathasbeenearned.第七页，共二十九页。㈢Accruedexpenses(accruedliabilities)→expensehavebeenincurredbutnotrecorded(1)accruedwages(2)accruedinterestonnotespayable(3)accruedtaxes第八页，共二十九页。㈣Accruedrevenues(accruedassets)→revenuesearnedbutnotrecorded(1)feesforservices(2)unbilledcommissions(3)accruedinterestonnotesreceivable(4)accruedrent第九页，共二十九页。Summarize:1Howdoyoutellthedifferencebetweendeferralsandaccruals?

Ifcashisreceivedorpaidinthecurrentperiod,buttherevenueorexpenserelatestoafutureperiod,therevenueorexpenseisadeferreditem.Ifcashwillnotbereceivedorpaiduntilafutureperiod,buttherevenueorexpenserelatestothecurrentperiod,therevenueorexpenseisanaccrueditem.第十页，共二十九页。Currentaccountingperiod→(cashreceivedorpaid)(revenueorexpenseincurred)→futureaccountingperiod(revenueorexpenseincurred)(cashreceivedorpaid)2Alladjustingentriesaffectatleastoneincomestatementaccountandonebalancesheetaccount.第十一页，共二十九页。四Examples:1AssumingthatonDecember31theamountofsuppliesonhandis$760,theamounttobetransferredfromtheassetaccounttotheexpenseaccountis$1240.(suppliesusedistheamountofadjustment)Dr.SuppliesExpense$1240Cr.Supplies$1240第十二页，共二十九页。2Thedebitbalanceof$2400inAprepaidinsuranceaccountrepresentsaDecember1prepaymentofinsurancefor24months.AttheendofDecembertheinsuranceforonemonthturnintoreality.Dr.InsuranceExpense$100Cr.PrepaidInsurance$100第十三页，共二十九页。Attention:(1)thebalanceofaprepaid(deferred)expenseisanassetthatwillbecomeanexpenseinafutureperiod.(2)Whatistheeffectofomittingadjustingentries?Ontheincomestatement,SuppliesExpenseandInsuranceExpensewillbeunderstatedbyatotalof$1340.Onthebalancesheet,SuppliesandPrepaidInsurancewillbeoverstatedbyatotalof$1340.第十四页，共二十九页。(3)

Prepaymentsofexpensesaresometimesmadeatthebeginningoftheperiodinwhichtheywillbeentirelyconsumed.3AccordingtoA’strialbalanceonDecember31,thebalanceintheunearnedrentaccountis$360.Thisrepresentsthereceiptofthreemonths’rentonDecember1forDec.Jan.Feb,AttheendofDecember$120rentshouldbeturnintoreality.第十五页，共二十九页。Dr.UnearnedRent$120Cr.RentRevenue$120Inthecaseofwagesexpense,ifthelastdayofapaidperiodisnotthelastdayoftheaccountingperiod,theaccruedwagesexpenseandtherelatedliabilitymustberecordedintheaccountsbyanadjustingentry.第十六页，共二十九页。4AttheendofDecember,accruedwagesforAwere$250.Dr.WagesExpense$250Cr.WagesPayable$250(1)wagesarepaidonthesecondandfourthFridaysforthetwo-weekperiodendingonthoseFridays.Thepaymentswere$950onDecember13and$1200onDecember27.第十七页，共二十九页。(2)ThewagesaccruedforMondayandTuesday,December30and31,are$250.(3)WagespaidonFriday,January10,totals$1275.第十八页，共二十九页。SundayMondayTuesdayWednesdayFourthdayFridaySaturday12345678910111213141516171819202122232425262728293031第十九页，共二十九页。13-------wagesexpense(paid)$95027-------wagesexpense(paid)$120030,31--wagesexpense(accrued)$250Jan,10:Dr.WagesPayable$250Cr.Cash$250第二十页，共二十九页。5AssumethatAsignedanagreementwithBonDecember15.TheagreementprovidesthatAwillbeoncalltoanswercomputerquestionsandrenderassistancetoB’semployees.TheservicesprovidedwillbebilledtoBonthefifteenthofeachmonthatarateof$20perhour.AsofDecember31,Ahadprovided25hoursofassistancetoB.第二十一页，共二十九页。Dr.AccountsReceivable$500Cr.FeesEarned$5006Fixedassetsareatypeoflong-termdeferredexpense.Thedecreasesinusefulnessiscalleddepreciation.Allfixedasset,expectland,losetheirusefulness.Theestimatedamountofdepreciationforthemonthisassumedtobe$50inDec.ofA.第二十二页，共二十九页。Dr.DepreciationExpense$50Cr.AccumulatedDepreciation__officeequipment$50

(contraaccountorcontraassetaccount)

Theremindervalueofofficeequipment$1750iscalledthebookvalueoftheassetornetbookvalue.Result:depreciationallocatesthecostofafixedassettoexpenseoveritsestimatedlife.第二十三页，共二十九页。Question:1IfA’sadjustmentforunearnedrenthadincorrectlybeenmadefor$180insteadof$120,whatwouldhavebeentheeffectonthefinancialstatements?Revenuewouldhavebeenoverstatedby$60;netincomewouldhavebeenoverstatedby$60;liabilitywouldhavebeenunderstatedby$60;andOwner’sequitywouldhavebeenoverstatedby$60.第二十四页，共二十九页。2whichoftheaccounts_____feesearned;misc.expenses;cash;wagesexpense;supplies;accountsreceivable;drawing;equipment;accumulateddepreciation______wouldnormallyrequireanadjustingentry?feesearned;

wagesexpense;

supplies;

accountsreceivable;

accumulateddepreciation第二十五页，共二十九页。SummaryofbasicadjustmentsTypesofadjustment

Adjustingentry

EffectofomittingitonBSandonIS

Deferredexpense

Dr.ExpenseCr.Assets

ExpenseunderstatedandnetincomeoverstatedAssetsoverstatedandowner’sequityoverstated

第二十六页，共二十九页。