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pg_0012 - Jan 9 Salaries Payable(3 days at $70 per day 2l0...

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Unformatted text preview: Jan. 9 Salaries Payable (3 days at $70 per day) ........... 2l0 Assets = Liabilities + Equity Salaries Expense {7 days at $70 per day) .......... 490 ‘700 ‘2]0 ‘490 Cash ................................ 700 Paid two weeks’ salary including three days accrued in December. The 5210 debit reflects the payment of the liability for the three days' salary accrued on December 31. The 5490 debit records the salary for January's first seven working days (including the New Year's Day holiday) as an expense of the new accounting period. The $700 credit records the total amount of cash paid to the employee. Accrued Revenues Point: Accrued revenues are also called accrued assels. The term accrued revenuw refers to revenues earned in a period that are both unrecorded and not yet received in cash (or other assets). An example is a technician who bills customers only when the job is done. If one—third of a job is complete by the end of a period, then the technician must record one-third of the expected billing as revenue in that period—even though there is no billing or collection. The adjusting entries for accrued revenues increase assets and increase revenues as shown in Exhibit 3.11. Accrued revenues commonly arise from services, products, interest, and rent. We use service fees and interest to show how to adjust for accrued revenues. EXHIBIT 3.11: Adjusting for Accrued Revenues re Asset Revenue Debit Credit adjustment adjustment ;, Adjusting Entry 4 Accrued Services Revenue Accrued revenues are not recorded until adjusting entries are made at the end of the accounting period. These accrued revenues are earned but unrecorded because either the buyer has not yet paid for them or the seller has not yet billed the buyer. FastForward provides an example. In the second week of December, it agreed to provide 30 days of consulting services to a local sports club for a fixed fee of 52,700. The terms of the initial agreement call for FastForward to provide services from December 12, 2009, through January 10, 2010, or 30 days of service. The club agrees to pay FastForward 52,700 on January 10, 2010, when the service period is complete. At December 31, 2009, 20 days of services have already been provided. Since the contracted services are not yet entirely provided, FastForward has neither billed the club nor recorded the services already provided. Still, FastForward has earned two-thirds of the 30—day fee, or 51,800 (52,700 4 2080). The never! U9 recognition gfincigie implies that it must report the 51,800 on the December income statement. The balance sheet also must report that the club owes FastForward 51,300. The year—end adjusting entry to account for accrued services revenue is Accrued Revenues Dec. 31 Record revenue and receivable for services provided but unbilled Pay me next month Jan. 10 Receive cash and reduce receivable Adjustment (f) Dec. 3| Accounts Receivable ......................... I300 Assets 2 Liabilities + Equity Consulting Revenue ...................... 1,800 + [.300 + 1.300 To record 20 days‘ accrued revenue. Accounts Receivable Consulting Revenue ...
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