Liabilities expenses that have been incurred but have

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Unformatted text preview: Expense Adjustments – Accrued Expense Adjustments At the end of December, NetSolutions had accrued salaries of $250. This is December’s salaries which is unpaid at the end of the month. The adjusting entry, Dr Salaries Expense 250 Cr Salaries Payable 250 Statement of Financial Position as at 31 December Current Liability Salaries Payable 250 Statement of Comprehensive Income For the year ended 31 Dec Revenue less: operating expenses …… Salaries Expense *Paid in Nov Paid in Dec 950+1,200 Unpaid at the end of Dec 4,525* 2,125 2,150 250 4,525 Adjusting entries Adjusting Deferrals • Deferred Revenue • Deferred Expense Deferred Revenue • Also called unearned revenue. • Examples: Unearned rent • Items initially recorded as liability but become revenue over time. • These items require adjustments at the end of the month/year. Business Transactions Business Recap, on Dec 1 NetSolutions received $360 for three month’s rent beginning Dec 1. A= Cash +360 L+ OE Unearned rent +360 General Journal Date Description Credit A,E,D (Debit) L,R,C (Credit) Increase Debit Credit Decrease Credit Debit Debit Cash 360 Unearned rent 360 Adjustments – Deferred Revenue Adjustments – Deferred Revenue Adjustments On December 1, NetSolutions received cash of $360 for three months’ rent beginning December 1. Upon cash receipt for rent revenue, 1/12 Dr Cash 360 Cr Unearned Revenue 360 The adjusting entry, 31/12 Dr Unearned Revenue Cr Rent Revenue 120 120 Adjusting entries – Deferred Revenue Adjusting entries – Deferred Revenue Revenue Revenue Statement of Financial Position as at 31 December Current Liability Unearned Rent 240 Statement of Comprehensive Income For the year ended 31 December Revenue …… Rent Revenue 120 Deferred Expense • Also called prepaid expense • Examples: Supplies and prepaid insurance • Items initially recorded as assets but become expenses over time. • These items require adjustments at the end of the month/year. Business Transactions Business Recap NetSolutions buys supplies for $2,000, agreeing to pay the supplier in the near future. A= Supplies +2,000 L+ OE Accounts Payable +2,000 General Journal Date Description Credit A,E,D (Debit) L,R,C (Credit) Increase Debit Credit Decrease Credit Debit Debit Supplies 2,000 Accounts Payable 2,000 Business Transactions Business Entry G. A= L+ OE Supplies -1,240 -1,240 Supplies exp •The balance in NetSolutions’ supplies account on Dec 31 is $2,000. •On Dec 31, the supplies were counted and the amount of supplies on hand Journal Generalwas $760. Date Description Credit A,E,D (Debit) L,R,C (Credit) Increase Debit Credit Decrease Credit Debit Debit Supplies exp 1,240 Supplies 1,240 Supplies available $2,000 less $760 on hand = $1,240 used Adjusting entries – Deferred Expense Adjusting entries – Deferred Expense Statement of Financial Position as at 31 December Current Asset Supplies 760 Statement of Comprehensive Income For the year ended 31 December Revenue less: o...
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This note was uploaded on 09/13/2013 for the course ACCOUNTING 101 taught by Professor Ms.me during the Fall '11 term at De La Salle University.

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