1 / 72

BAF3M Accounting

BAF3M Accounting. Chapter 9 – Completing the Accounting Cycle. 9.1 The Adjustment Process. Accountants need to ensure that the statements they produce are: Up to Date, Accurate, Consistent. Adjustments are necessary to ensure Accounts are brought up to date

fedella-jerome
Download Presentation

BAF3M Accounting

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. BAF3M Accounting Chapter 9 – Completing the Accounting Cycle

  2. 9.1 The Adjustment Process • Accountants need to ensure that the statements they produce are: • Up to Date, Accurate, Consistent • Adjustments are necessary to ensure • Accounts are brought up to date • All late transactions are taken into account • All calculations are correct • All GAAPs have been complied with

  3. 9.1 The Adjustment Process • During the course of the fiscal period, things are allowed to get out of date • Adjusting entries get everything up-to-date and accurate again • Why allowed to go inaccurate? • Saves time, money, effort

  4. 9.1 The Adjustment Process • We will look at the adjusting entries for three main areas • Supplies • Prepaid Expenses • Late Arriving Invoices

  5. Adjustment #1: Supplies • The Supplies balance shows the total supplies purchased in the year • Adjusting Entries

  6. What the balance is What is the Balance?

  7. What the balance should be? What Should The Balance Be? • What the balance “should be” is determined from someone counting the supplies that remain in the business at the end of the year

  8. The required adjustment The Adjustment

  9. What the balance is Introducing a New Account • The income statement account related to Supplies is shown above • The accounting clerk has not used this account during the year

  10. What the balance should be Expense: What Should the Balance Be? • What the balance “should be” is equal to the amount of supplies “used up” during the year

  11. The required adjustment What the Adjustment Would Be

  12. What that Looks Like in the Journal • The adjusting entry as it would appear in the general journal

  13. Adjustment #2: Prepaid Expenses • The Prepaid Insurance balance shows the total cost of insurance bought in the year • Adjusting Entries

  14. What the balance is What is the Balance?

  15. What the balance should be What Should the Balance Be? • What the balance “should be” is determined from someone calculating the portion of the insurance policy that is “unexpired” or “not used up yet, but paid for”

  16. How did you Get $1200? • An Insurance policy was purchased on September 1st for one year. The fiscal period expires Dec. 31. As of Dec. 31, how many months of insurance have been used ? - 4 months have been used Each month costs: $1800 / 12mo. = $150 4 months have been used: $150*4 = $600

  17. The required adjustment The Adjustment

  18. What the balance is Introducing Your 2nd New Account • The income statement account related to Prepaid Insurance is shown above • The accounting clerk has not used this account during the year

  19. What the balance should be Expense: What Should the Balance Be? • What the balance “should be” is the amount of the insurance policy that has expired at year’s end

  20. The required adjustment What the Adjustment Should Be?

  21. What it Looks Like in the Journal • The adjusting entry for insurance as it would appear in the general journal

  22. Adjustment #3: Late Arriving Invoices • The Accounts Payable balance does not include two invoices that arrived late • Adjusting Entries

  23. Two late invoices have arrived • $212 for the Telephone Bill • $315 for the Utilities Bill

  24. What is the Balance? • Little analysis is needed for this adjustment

  25. The Adjustment • Simply enter the late invoices

  26. The Adjustment contd. • Simply enter the late invoices

  27. What Should the Balance Be? • And calculate the adjusted balance

  28. Expense: What is the Balance?

  29. The Adjustments

  30. The What Should the Balance Be?

  31. What that Looks Like in the Journal • The adjusting entry for late invoices as it would appear in the general journal

  32. Adjusting Entries—Summary Summary 1 Balance Sheet • The adjusting entries have brought balance sheet accounts up to date

  33. Adjusting Entries—Summary Summary 2 Balance Sheet Income Statement • And have recorded expenses in related accounts on the income statement

  34. Check your Understanding • Pg 308 # 1-6

  35. 9.2 Adjusting Entries and the Work Sheet • The 6 column work sheet from last chapter has 2 columns added to it for Adjustments • So you now have 8 columns • Trial Balance DR/CR • Adjustments DR/CR • Income Statement DR/CR • Balance Sheet DR/CR

  36. 9.2 Adjusting Entries and the Work Sheet ADJUSTING FOR SUPPLIES • According to Global Logistics’ trial balance they have $1480.90 worth of supplies • However, once a physical inventory was completed on December 31, 2008 they discovered that they only had $526.00 worth of supplies on hand

  37. 9.2 Adjusting Entries and the Work Sheet ADJUSTING FOR SUPPLIES 20-- Dec. 31 Supplies Expense 964.90 Supplies 964.90

  38. 9.2 Adjusting Entries and the Work Sheet ADJUSTING FOR INSURANCE USED • According to Global Logistics’ trial balance they have $6564 in prepaid insurance • They have$4070 remaining in unused insurance

  39. 9.2 Adjusting Entries and the Work Sheet ADJUSTING FOR INSURANCE USED 20-- Dec. 31 Insurance Expense 2494 Prepaid Insurance 2494

  40. 9.2 Adjusting Entries and the Work Sheet ADJUSTING FOR LATE ARRIVING INVOICES • Three late invoices in this example Telephone $ 45 Truck Repair 496 Printer Repair 85 Total $626

  41. 9.2 Adjusting Entries and the Work Sheet 20-- Dec. 31 Telephone expense 45 Truck expense 496 Miscellaneous expense 85 Accounts Payable 626

  42. COMPLETING THE SHEET • From this point you complete the 8-column worksheet just as you completed the 6-column worksheet • Except as you transfer numbers to the correct column you may need to add or subtract the adjustments into the totals as necessary • Balance the columns using the “magical” number • Underline where necessary

  43. 9.2 Adjusting Entries and the Work Sheet • Journalizing and Posting the Adjusting Entries • All the adjusting entries need to be properly journalized and posted to the ledger • See Figs 9.9 and 9.10

  44. 9.3 Closing Entries Concepts • REAL ACCOUNTS – balances that continue into the next fiscal periodex. Bank, trucks, accounts payable etc. • NOMINAL ACCOUNTS – have balances that do not continue into the next fiscal periodONLY Expenses, drawing and revenue

  45. 9.3 Closing Entries Concepts • CLOSING OUT AN ACCOUNT – means to make it have no balance. Nominal accounts are closed out at the end of the fiscal period. • INCOME SUMMARY ACCOUNT – summarizes the revenues and expenses of the period. Represents either the net income or net loss for the fiscal period

More Related