T3 notes

T3 notes - Chapter 3: Adjusting accounts and preparing...

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1 Chapter 3: Adjusting accounts and preparing financial statement ***** This is an important chapter which builds the foundation for all other accounting courses afterwards. I. Accruals and prepayments Accruals = in arrears (should have been paid / received but not yet done so) (Unpaid expense / Unreceived revenue) Prepayments = in advance (paid / receive before you enjoy / carry out the work) (Unearned revenue / Prepaid expense) Dr. Expense Cr. Unpaid expenses Dr. Unreceived revenue Cr. Revenue Dr. Cash Cr. Prepaid revenue Dr. Prepaid revenue Cr. Revenue (when realized) Dr. Prepaid expense (Asset) Cr. Cash Dr. Expense Cr. Prepaid expense (asset) (matching) Depreciation Dr. Depreciation Cr. Accumulated depreciation Depreciation: expense account Accumulated depreciation: CONTRA ASSET Calculating depreciation (to be discussed in details in Ch. 10) STRAIGHT LINE METHOD (Cost Residual value) / estimated useful life READ AND ATTEMPT DEMONSTRATION PROBLEM 1 (TB106) AND 2 (TB108) Adjusted trial balance trial balance taking into consideration of the effect of adjusting entries Additional Problem: problem 3-3A Problem 3-3A (Continued) Part 2 Adjustment (a)
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2 Dec. 31 Insurance Expense . .......................................... 3,000 Prepaid Insurance . ...................................... 3,000 To record the insurance expired. Adjustment (b)
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T3 notes - Chapter 3: Adjusting accounts and preparing...

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