Week 4 Have a closer look at year end adjustments (instructor)

ACCT2010
Principles of
Accounting I
A closer look at year end
adjustments
1

Relevant readings
1.
Chapter 4 – Key points (textbook page reference)
a.
Adjusting revenues & expenses pp.162-166
b.
Deferred & accrued revenues pp.166-167
c.
Deferred (prepaid) & accrued expenses pp.167-172
d.
Relationship between income statement & balance sheet p.175
e.
Financial analysis tools – earnings per share p.177 and total
asset turnover ratio p.180
2.
Demonstration Case – Greener Grass Corporation
pp.184-189
2

Content
I.
What are adjusting entries and Why needed
II.
Deferred & accrued revenues
III.
Deferred & accrued expenses
IV.
Preparing financial statements from adjusted trial balance
V.
Financial analysis tool
VI.
Class activities
a.
business transactions
b.
activities
3

ACCT2010
Principles of
Accounting I
I.
What are the adjusting
entries and Why needed
4

What are adjusting entries &
Why needed
1.
Revisit the accounting cycle
5

What are adjusting entries &
Why needed
2.
Unadjusted trial balance (TB) - revisit
a.
A listing of individual accounts in general ledger, in
financial statement order
b.
Account ending balances, where Dr. and Cr. Balances are
listed in two separate columns
c.
Total Dr. = total Cr.
d.
Watch the video again https://
6

What are adjusting entries &
Why needed
3.
How a typical TB looks like …
7

What are adjusting entries &
Why needed
3.
How a typical TB looks like … (Continued)
8

What are adjusting entries &
Why needed
4.
Why adjusting entries are needed (Purpose of
adjustments)
a.
Adjustments are required at the end of each
accounting period
b.
In order to get the revenues & expenses into the
“right” period
9

What are adjusting entries &
Why needed
5.
Types of adjustments
10

ACCT2010
Principles of
Accounting I
II.
Deferred & accrued
revenues
11

Deferred & accrued revenues
1.
Adjustment process
12

Deferred & accrued revenues
2.
Deferred (Unearned) revenues - illustration
13
Papa John’s received cash last period and recorded an increase in
Cash and increase in Unearned Franchise Fees, a liability, to
recognize the business’s obligation to provide future services to
franchisees. During January, Papa John’s performed $1,100 in
services for franchisees who had previously paid fees.
Papa John’s received cash last period and recorded an increase in
Cash and increase in Unearned Franchise Fees, a liability, to
recognize the business’s obligation to provide future services to
franchisees. During January, Papa John’s performed $1,100 in
services for franchisees who had previously paid fees.

Deferred & accrued revenues