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Accounting I (Part I)
-Accounting Cycle
Napaporn Likitwongkajon
Faculty of Management Science
Khon Kaen University
Accounting I
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Account Titles
Assets สนิทรัพย์
Current Assets สนิทรัพย์หมนุเวียน
Cash เงินสด
Accounts Receivable ลกูหนีก้ารค้า
- Allowance for doubtful accounts คา่เผ่ือหนีส้งสยัจะสญู
Notes receivable ตัว๋เงินรับ
Inventory สนิค้าคงเหลอื
Prepaid Insurance คา่ประกนัภยัจ่ายลว่งหน้า
Prepaid Expense คา่ใช้จ่ายจ่ายลว่งหน้า
Accrued Revenues รายได้ค้างรับ
Supplies วสัดสุิน้เปลอืง
Property, plant, and equipment ที่ดิน,อาคารและอปุกรณ์
Land ที่ดิน
Equipments อปุกรณ์สาํนกังาน
Accumulated Depreciation—Equipments คา่เสือ่มราคาสะสม-อปุกรณ์สาํนกังาน
Buildings อาคาร
Accumulated Depreciation—Buildings คา่เสือ่มราคาสะสม-อาคาร
Vehicles ยานพาหนะ
Accumulated Depreciation— Vehicles คา่เสือ่มราคาสะสม-ยานพาหนะ
Other Assets สนิทรัพย์อื่น
Patents สทิธิบตัร
Copyrights ลขิสทิธ์ิ
Trademarks and Trade Names เคร่ืองหมายการค้า
Franchises and Licenses สมัปทาน
Goodwill คา่ความนิยม
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Liabilities หนีส้นิ
Current Liabilities หนีส้นิหมนุเวียน
Bank Overdraft เงินเบิกเกินบญัชี
Accounts Payable เจ้าหนีก้ารค้า
Notes Payable ตัว๋เงินจ่าย
Salaries Payable เงินเดือนค้างจ่าย
Income taxes payable ภาษีเงินได้ค้างจ่าย
Short-term Loans เงินกู้ ระยะสัน้
Unearned Revenue รายได้ค้างรับ
Accrued Expense คา่ใช้จ่ายค้างจ่าย
Non-Current Liabilities หนีส้นิไมห่มนุเวียน
Long-term Loans เงินกู้ ระยะยาว
Equity สว่นของเจ้าของ
Proprietorship กิจการเจ้าของคนเดียว
Capital-………(owner’s name) ทนุ-คณุ.......
Withdrawals ถอนใช้สว่นตวั
Net Income (Net Loss) กําไรสทุธิ (ขาดทนุสทุธิ)
Partnership ห้างหุ้นสว่น
Capital-………(partners’ name) ทนุ-คณุ.........
Unappropriated Retained Earnings สว่นแบง่กําไรท่ียงัไมไ่ด้จดัสรร
Corporation บริษัทจํากดั
Share Capital-Ordinary ทนุหุ้นสามญั
Common stock ทนุหุ้นสามญั
Dividends เงินปันผล
Accounting I
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Revenues รายได้
Merchandising Company กิจการซือ้มาขายไป
Sales Revenue ยอดขาย
Sales Returns and Allowances สนิค้ารับคืนและสว่นลด
Sales Discounts สว่นลดจ่าย
Service Company กิจการให้บริการ
Service Revenue รายได้คา่บริการ
Rent Revenue รายได้คา่เช่า, คา่เช่ารับ
Fee Revenue รายได้คา่ธรรมเนียม,คา่ธรรมเนียมรับ
Interest Revenue ดอกเบีย้รับ
Expenses คา่ใช้จ่าย
Merchandising Company
Cost of Goods Sold ต้นทนุขาย
Purchases ซือ้
Freight-in คา่ขนสง่เข้า
Purchases Returns and Allowances สนิค้าสง่คืนและสว่นลด
Purchases Discounts สว่นลดรับ
Freight-out คา่ขนสง่ออก
Merchandising and Service Company Salaries and Wages Expense คา่แรงและเงินเดือน
Advertising Expense คา่โฆษณา
Utilities Expense คา่สาธารณปูโภค
Insurance Expense คา่ประกนัภยั
Maintenance and Repairs Expense คา่ซอ่มแซมและบํารุงรักษา
Rent Expense คา่เช่าจ่าย
Bad Debts Expense หนีส้งสยัจะสญู
Supplies Expense คา่วสัด ุ
Depreciation Expense คา่เสือ่มราคา
Interest Expense ดอกเบีย้จ่าย
Miscellaneous Expense คา่ใช้จ่ายเบ็ดเตลด็
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What is accounting?
Accounting Standard
IFRS :
GAAP :
Measurement Principle
Cost Principle:
Fair value Principle:
Assumption
Monetary Unit:
Economic Entity:
Form of Business Ownership
1. Proprietorship:
2. Partnership: 3. Corporation:
Accounting Equation
Assets :
Liabilities :
Equity :
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Classify items
The following items were taken from the trial balance.
1 Cash $2,291.1 7 Inventories $2,357.0
2 Accounts
receivable 2,883.9 8
Income taxes
payable 86.3
3 Common stock 2,874.2 9 Property, plant, and
equipment 1,957.7
4 Notes payable 342.9 10 Retained Earnings 5,818.9
5 Other assets 3,759.9 11 Accounts payable 2,815.8
6 Other liabilities 1,311.5
(a) Classify each of these items as an asset, liability, or stockholders’ equity
and determine the total dollar amount for each classification.
Assets
Total assets
Liabilities
Total liabilities
Equity
Total equity
(b) Determine accounting equation by calculating the value of total assets,
total liabilities, and total stockholders' equity.
=
+
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Financial Statement
1. Balance Sheet <IFRS> Statement of Financial Position
2. Income Statement < IFRS> Statement of Profit or Loss
3. Statement of Cash Flows
4. Statement of Change in Equity
5. Note to Financial Statement
Financial Statement
On June 1 Bear Service Co. was started with an initial investment in the
company of $22,100 cash.
Here are the assets and liabilities of the company at June 30, and the revenues
and expenses for the month of June, its first month of operations:
Cash $4,600 Notes payable $12,000
Accounts receivable 4,000 Accounts payable 500
Service revenue 7,500 Supplies expense 1,000
Supplies 2,400 Maintenance and repair
expense 600
Advertising expense 400 Utilities expense 300
Equipment 26,000 Salaries and wages
expense 1,400
In June, the company issued no additional stock, but paid dividends of$1,400.
Prepare an income statement and a retained Earnings statement for the
month of June and a balance sheet at June 30, 20x2.
Accounting I
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Bear Service Co.
Income Statement
For the Month Ended June 30, 20x2
Revenues
Expenses
Total expenses
Net income
Bear Service Co.
Retained Earnings Statement For the Month Ended June 30, 20x2
Retained Earnings, June 1
Add:
Less:
Retained Earnings, June 30
Bear Service Co.
Balance Sheet June 30, 20x2
Assets
Total assets
Liabilities and Equity
Liabilities
Equity
Total Liabilities and Equity
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Transactions
Step 1: Transactions Analysis (1)
On September 1, 20x1, Ray and Barbara decide to open a computer
programming company that they incorporate as Softbyte Inc. During
September the following transactions occurred.
(1) Investment by Shareholders: they invest $15,000 cash in exchange for
capital shares.
(2) Purchase of Equipment for Cash: Softbyte purchases computer equipment
for $7,000 cash.
(3) Purchase of Supplies on Credit: Softbyte purchases for $1,600 from Acme
Supply Company computer paper and other supplies expected to last several
months.
(4) Services Provided for Cash: Softbyte receives $1,200 cash from customers
for programming services it has provided.
(5) Purchase of Advertising on Credit: Softbyte receives a bill for $250 from
the Daily News for advertising but postpones payment until a later date.
(6) Services Provided for Cash and Credit: Softbyte provides $3,500 of
programming services for customers. The company receives cash of $1,500
from customers, and it bills the balance of $2,000 on account.
(7) Payment of Expenses: Softbyte pays the following Expenses in cash for
September: store rent $600, salaries of employees $900, and utilities $200.
(8) Payment of Accounts Payable: Softbyte pays its $250 Daily News bill in
cash.
(9) Receipt of Cash on Account: Softbyte receives $600 in cash from
customers who had been billed for services [in Transaction (6)].
(10) Dividends: Softbyte pays a dividend of $1,300 in cash.
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(1) The effect of this transaction on the basic equation is:
Assets
=
Liabilities
+
Stockholders’ Equity Explan- ations
Cash
+ Accounts Receivable
+ Supplies + Equipment Accounts Payable
Share Capital
+ Retained Earnings
Revenues - Expenses - Dividends
1. + + + = + + - -
2. + + + = + + - -
3. + + + = + + - -
4. + + + = + + - -
5. + + + = + + - -
6. + + + = + + - -
7. + + + = + + - -
8. + + + = + + - -
9. + + + = + + - -
10 + + + =
+ + - -
+
+
+
=
+
+
-
-
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Financial Statement (IFRS)
Prepare an income statement and a retained Earnings statement
for the month of June and a balance sheet at September 30, 20x1.
Softbyte Inc.
Income Statement
For the Month Ended September 30, 20x1
Revenues
Expenses
Total expenses
Net income
Softbyte Inc.
Retained Earnings Statement
For the Month Ended September 30, 20x1
Retained Earnings, September 1
Add:
Less:
Retained Earnings, September 30
Softbyte Inc.
Statement of Financial Position September 30, 20x1
Assets
Total assets
Equity and Liabilities Equity
Liabilities
Total Equity and Liabilities
Accounting I
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Softbyte Inc. Statement of Cash Flows
For the Month Ended September 30, 20x1
Cash flows from operating activities Cash receipts from revenues
Cash payments for expenses
Net cash provided by operating activities
Cash flows from investing activities
Purchase of equipment
Cash flows from financing activities
Sale of ordinary shares
Payment of cash dividends
Net increase in cash
Cash at the beginning of the period
Cash at the end of the period
Step 1: Transactions Analysis (2) - corporation
On April 1, 20x2, Vagabond Travel Agency Inc. was established. These
transactions were completed during the month.
(1) Stockholders invested $30,000 cash in the company in exchange for
common stock.
(2) Paid $900 cash for April office rent.
(3) Purchased office equipment for $3,400 cash.
(4) Purchased $200 of advertising in the Chicago Tribune, on account.
(5) Paid $500 cash for office supplies.
(6) Earned $12,000 for services provided: Cash of $3,000 is received from
customers, and the balance of $9,000 is billed to customers on account.
(7) Paid $400 cash dividends.
(8) Paid Chicago Tribune amount due in transaction (4).
(9) Paid employees’ salaries $1,800 in cash.
(10) Received $9,000 in cash from customers who have previously been billed
in transaction (6).
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(2) The effect of this transaction on the basic equation is:
Assets
=
Liabilities
+
Stockholders’ Equity Explan- ations
Cash
+ Accounts Receivable
+ Supplies + Equipment Accounts Payable
Share Capital
+ Retained Earnings
Revenues - Expenses - Dividends
1. + + + = + + - -
2. + + + = + + - -
3. + + + = + + - -
4. + + + = + + - -
5. + + + = + + - -
6. + + + = + + - -
7. + + + = + + - -
8. + + + = + + - -
9. + + + = + + - -
10 + + + =
+ + - -
+
+
+
=
+
+
-
-
Accounting I
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Step 1: Transactions Analysis (3) - Proprietorship
Robin created a providing legal service, Robin Service., on July 1, 20x2.
On July 31 the balance sheet showed:
Cash $4,000
Office Equipment $5,000
Accounts Receivable $2,500
Accounts Payable $4,200
Supplies $500
Capital-Robin $7,800
During August the following transactions occurred.
Aug. 1 Collected $1,100 of accounts receivable due from customers.
4 Paid $2,700 cash for accounts payable due
9 Earned revenue of $5,400, of which $3,600 is collected in cash and
the balance is due in September.
15 Purchased additional office equipment for $4,000, paying $700 in
cash and the balance on account.
19 Paid cash for salaries $1,400.
20 Purchased $1,700 of additional office supplies on credit.
23 Withdrew $700 cash for personal use.
26 Received $5,000 from Standard Federal Bank; the money was
borrowed on a 4-month note payable.
28 Paid cash for advertising expenses $350.
31 Paid cash for utility expenses this month $380.
Accounting I
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(3) The effect of this transaction on the basic equation is:
Assets
=
Liabilities
+
Stockholders’ Equity Explan- ations
Cash
+ Accounts Receivable
+ Supplies + Equip. Notes Payable
+ Accounts Payable
Capital- Robin
+ Profit and Loss
Rev. - Exp. - Withdrawal
+ + + = + + + - -
+ + + = + + + - -
+ + + = + + + - -
+ + + = + + + - -
+ + + = + + + - -
+ + + = + + + - -
+ + + = + + + - -
+ + + = + + + - -
+ + + = + + + - -
+ + + =
+ + + - -
+
+
+
=
+ +
+
-
-
Accounting I
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General Journal
General Journal Page 1
Date Account Titles Ref. Debit Credit
Jan 1 Cash 15,000 -
Share Capital—Ordinary 15,000 -
Issued shares for cash
5 Delivery Equipment 14,000 -
Cash 8,000 -
Account Payable 6,000 -
purchases a delivery truck
Step 1: Transactions Analysis (4) – corporation with solution
On July 1, 20x1, Cindy Belton opened Cindy Belton, Attorney at Law. On July
31, the account showed Cash $4,000, Accounts Receivable $1,500, Supplies
$500, Office Equipment $5,000, Accounts Payable $4,200, Capital Shares
$6,000, Retained Earnings $800. The following transactions occurred.
Aug. 1 Collected $1,400 of accounts receivable due from clients
5 Paid $2,700 cash for accounts payable due
10 Earned revenue of $9,000 of which $3,000 is collected in cash and
the balance is due in September
15 Purchased additional office equipment for $1,000 paying $400 in
cash and the balance, $600 on account.
20 Paid salaries$3,000 rent for August $900, and advertising
expenses $350.
25 Declared and paid a$750 cash dividend
28 Received $2,000 from Standard Federal Bank; the money was
borrowed on a 4-month note payable.
30 Incurred utility expenses for month on account $250.
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(4) An analysis of the transactions is shown below.
Date Cash +
Accounts
Receivable + Supplies +
Office
Equipme
nt =
Notes
Payable +
Accounts
Payable +
Capital
Shares +
Retained
Earnings +
Revenu
es -
Expens
es -
Divide
nds
Explanation
s
Balance 4,000 + 1,500 + 500 + 5,000 = + 4,200 + 6,000 + 800 + - -
Aug. 1 1,400 + -1,400 + + = + + + + - -
Subtotal: 5,400 + 100 + 500 + 5,000 = + 4,200 + 6,000 + 800 + - -
5 -2,700 + + + = + -2,700 + + + - -
Subtotal: 2,700 + 100 + 500 + 5,000 = + 1,500 + 6,000 + 800 + - -
10 3,000 + 6,000 + + = + + + + 9,000 - - service
revenue
Subtotal: 5,700 + 6,100 + 500 + 5,000 = + 1,500 + 6,000 + 800 + 9,000 - -
15 -400 + + + 1,000 = + 600 + + + - -
Subtotal: 5,300 + 6,100 + 500 + 6,000 = + 2,100 + 6,000 + 800 + 9,000 - -
20 -4,250 + + + = + + + + - 3,000 - salaries
+ + - 900 -
rent
expense
+ + - 350 -
advertisin
g expense
Subtotal: 1,050 + 6,100 + 500 + 6,000 = + 2,100 + 6,000 + 800 + 9,000 - 4,250 -
25 -750 + + + = + + + + - 0 - 750 dividend
Subtotal: 300 + 6,100 + 500 + 6,000 = + 2,100 + 6,000 + 800 + 9,000 - 4,250 - 750
28 2,000 + + + = 2,000 + + + + - -
Subtotal: 2,300 + 6,100 + 500 + 6,000 = 2,000 + 2,100 + 6,000 + 800 + 9,000 - 4,250 - 750
30 + + + = + 250 + + + - 250 - utilities
expense
Balance 2,300 + 6,100 + 500 + 6,000 = 2,000 + 2,350 + 6,000 + 800 + 9,000 - 4,500 - 750
Accounting I
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Step 2: Journalizing
General Journal Page…..
Date Account Titles Ref. Debit Credit
Accounting I
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General Journal Page…..
Date Account Titles Ref. Debit Credit
Chart of Account
Account Number Account Titles
101 Cash
102 Account Receivables
: :
100—199 Assets, 200—299 Liabilities,
300—399 Equity, 400—499 Revenues, 500—599 Expenses
Cindy Belton, Attorney at Law
Chart of Account
Account Number Account Titles
Cash
Accounts Receivable
Supplies
Office Equipment
Notes Payable
Accounts Payable
Capital Share
Service Revenue
Salaries
Rent expense
Advertising expense
Dividend
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General Ledger
Cash No. 101
Date Explanation Ref. Debit
Date Explanation Ref. Credit
Sep. 1 Balance
4,000 - Sep. 5 Rent Expense J1 1,000 -
25 Service Revenue J1 3,000 - 30 Account Payable J2 2,000 -
Step 3: Posting
The transactions are recorded in the general journal below. Post the journal
entries to T-accounts.
General Journal Page 1
Date Account Titles Ref. Debit Credit
Aug. 1 Accounts Receivable 2,800 - Service Revenue 2,800 -
10 Cash 4,000 -
Service Revenue 4,000 -
20 Rent Expense 1,000 -
Cash 1,000 -
30 Cash 1,400 - Accounts Receivable 1,400 -
General Ledger – T accounts
Cash 101 Accounts Receivable 102
Service Revenue 401 Rent Expense 502
4,000
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General Ledger
Cash No. 101 Date Explanation Ref. Debit
Date Explanation Ref. Credit
Accounts Receivable No. 102 Date Explanation Ref. Debit
Date Explanation Ref. Credit
Service Revenue No. 401
Date Explanation Ref. Debit
Date Explanation Ref. Credit
Rent Expense No. 501
Date Explanation Ref. Debit
Date Explanation Ref. Credit
Trial Balance August 30, 20x2
Debit Credit
Cash
Accounts Receivable
Service Revenue
Rent Expense
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Step 4: Trial Balance
The ledger accounts of the R&P Gym at June 30, 20x1 are shown below:
Accounts Payable $ 9,100
Accounts Receivable 1,050
Building 51,400
Share Capital-Ordinary 63,100
Cash 15,000
Exercise Equipment 18,900
Weight Equipment 22,000
Notes Payable 49,000
Office Supplies 350
Office Equipment 2,000
Dividends 10,500
Prepare a trial balance with the ledger accounts arranged in the proper
financial statement order. Include the appropriate heading.
R&P Gym
Trial Balance
June 30, 20x1
Account
Number
Account Titles Debit Credit
$121,200 $121,200
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Step 7: Prepare Financial Statement
The trial balance of Smile Service is below:
Smile Service Trial Balance
December 31, 20x4
Account Number
Account Titles Debit Credit
101 Cash $198,000 102 Accounts Receivable 370,000 103 Supplies 6,000 111 Furniture 100,000 112 Accumulated depreciation-
furniture $40,000
113 Building 250,000 114 Accumulated depreciation-
building 130,000
201 Accounts Payable 380,000 202 Unearned revenue 45,000 301 Capital-Smile 293,000 303 Withdrawals 65,000 401 Service revenues 286,000 501 Salary expense 172,000 502 Utility expense 13,000
Total $1,174,000 $1,174,000
Instructions:
(1) Write the trial balance on a six-column worksheet and complete the worksheet of Smile Service for the year ended December 31, 20x4.
(2) Prepare the income statement, and the balance sheet in report format.
(3) Journalize the closing entries.
Corporation: 301 Share Capital-Ordinary 293,000 302 Retained Earnings 65,000 303 Dividend 0
Accounting I
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Smile Service Worksheet
December 31, 20x4
Account
Account Titles Trial Balance Income Statement Balance Sheet
No. Dr. Cr. Dr. Cr. Dr. Cr.
101 Cash 198,000
102 Account Receivable 370,000
103 Supplies 6,000
111 Furniture 100,000
112 Accumulated depreciation
40,000
- furniture
113 Building 250,000
114 Accumulated depreciation
130,000
- building
201 Accounts Payable 380,000
202 Unearned revenue 45,000
301 Capital-Smile 293,000
302 Withdrawals 65,000
401 Service revenues 286,000
501 Salary expense 172,000
502 Utility expense 13,000
1,174,000 1,174,000
Smile Service
Income Statement
For the year ended December 31, 20x4
Revenues :
Expenses :
Accounting I
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Smile Service
Balance Sheet
December 31, 20x4
Assets Current Assets :
Property, Plants and Equipment :
Total Assets
Liabilities and Owner’s Equity
Liabilities :
Owner’s Equity:
Capital-Smile
Add
Less Withdrawals Total Liabilities and Owner’s Equity
Corporation: Owner’s Equity:
Share Capital-Ordinary
Retained Earnings
Total Liabilities and Owner’s Equity
Retained Earnings =
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Step 8: Closing Entries – Smile Service
General Ledger
Capital 301 Withdrawals 303
Income Summary 302 Salaries Expense 501
Service Revenue 401 Utility Expense 502
Corporation: General Ledger
Share Capital-Ordinary 301 Dividends 303
Retained Earnings 302 Salaries Expense 501
Service Revenue 401 Utility Expense 502
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Step 8: Closing Entries – Smile Service
General Journal Page…..
Date Account Titles Ref. Debit Credit
Dec. 31 Closing entries
(1)
To close revenue accounts
(2)
To close expense accounts
(3)
To close net income
(4)
To close withdrawals
Corporation: Share Capital-Ordinary Cr.293,000 Dividend Dr.65,000
General Journal Page…..
Date Account Titles Ref. Debit Credit
Dec. 31 Closing entries
(3)
To close net income
(4)
To close dividend
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Step 9: A Post-Closing Trial Balance – Smile Service
Smile Service Post-Closing Trial Balance
December 31, 20x4
Account Number
Account Titles Debit Credit
101 Cash
102 Accounts Receivable 103 Supplies
111 Furniture 112 Accumulated depreciation-
furniture
113 Building
114 Accumulated depreciation-building
201 Accounts Payable
202 Unearned service revenue 301 Capital-Smile
302 Income Summary 303 Withdrawals
401 Service revenues 501 Salary expense
502 Utility expense
Total
Corporation: 301 Share Capital-Ordinary
302 Retained Earnings 303 Dividend
401 Service revenues
501 Salary expense 502 Utility expense
Total
Accounting I
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Step 5: Adjusting Entries
Adjusting Entries for Deferrals Adjusting Entries for Accruals
(1) Prepaid Expense
Dr. Expense
Cr. Prepaid Expense
(3) Accrued Revenues
Dr. Accrued Revenues
Cr. Revenues
(1.1) Prepaid Expense
Dr. …..Expense
Cr. Prepaid Expense
(4) Accrued Expenses
Dr. Expense
Cr. Accrued Expense
(1.2) Supplies
Dr. Supplies Expense
Cr. Supplies
(1.3) Plants, Equipments and Vehicles
Dr. Depreciation Expense-…
Cr. Accumulated Depreciation-…
(2) Unearned Revenues
Dr. Unearned Revenues
Cr. Revenues
Each adjusting entries example based on this trial balance.
Trial Balance October 31, 20x1
Account Number Account Titles Debit Credit 101 Cash $15,200 102 Supplies 2,500 103 Prepaid insurance 600 111 Equipment 5,000 201 Note Payable 5,000 202 Accounts Payable 2,500 203 Unearned revenue 1,200 301 Capital-Smile 10,000 302 Retained Earnings 0 303 Dividends 500 401 Service revenues $10,000 501 Salary expense 4,000 502 Rent expense $900
Total $28,700 $28,700
Accounting I
N Likitwongkajon Page 30
(1) Prepaid Expense
(1.1) Prepaid Expense
On October 4, Company paid $600 for a one-year fire insurance policy.
Coverage began on October 1. Company recorded the payment by increasing
(debiting) Prepaid Insurance.
General Ledger
Prepaid insurance 103 Insurance Expense 503
General Journal Page 5
Date Account Titles Ref. Debit Credit
Oct. 31
To record insurance expired
(1.2) Supplies
Company purchased supplies costing $2,500 on October 5. Company recorded
the payment by increasing (debiting) the asset Supplies. An inventory count on
October 31 reveals that $1,000 of supplies are still on hand.
General Ledger
Supplies 102 Supplies Expense 504
General Journal Page 5
Date Account Titles Ref. Debit Credit
Oct. 31
To record supplies used
Accounting I
N Likitwongkajon Page 31
(1.3) Plants, Equipments and Vehicles
Company estimates depreciation on the office equipment to be $480 a year, or
$40 per month. (Useful life= 10 years, scrape cost= $200)
General Ledger
Equipment 111
Accumulated Depreciation- Depreciation expense-
Equipment 112 Equipment 505
General Journal Page 5
Date Account Titles Ref. Debit Credit
Oct. 31
To record monthly depreciation
Balance Sheet (Partial)
October 31, 20x1
Assets
Property, Plants and Equipment :
Equipment
Less Accumulated Depreciation- Equipment
Balance Sheet (Partial)
November 30, 20x1
Property, Plants and Equipment :
Equipment
Less Accumulated Depreciation- Equipment
Accounting I
N Likitwongkajon Page 32
(2) Unearned Revenues
Company received $1,200 on October 2 from R. Knox (customer) for
advertising services expected to be completed by December 31. Company
recorded the received by increasing (crediting) the Unearned Revenue.
General Ledger
Unearned Revenue 203 Service Revenue 401
General Journal Page 5
Date Account Titles Ref. Debit Credit
Oct. 31
To record revenue for services provided
Alternative treatment of prepaid expense and unearned revenue
(1) Prepaid Expense (1.1 and 1.2)
(2) Unearned Revenues
Accounting I
N Likitwongkajon Page 33
(3) Accrued Revenues
In October Company earned $200 for advertising services that had not been
recorded.
General Ledger
Account Receivable 104 Service Revenue 401
General Journal Page 5
Date Account Titles Ref. Debit Credit
Oct. 31
To record revenue for services provided
(4) Accrued Expenses
Company signed a three-month note payable in the amount of $5,000 on
October 1. (Interest rate = 12%per year)
General Ledger
Note Payable 201
Interest Payable 204 Interest Expense 506
General Journal Page 5
Date Account Titles Ref. Debit Credit
Oct. 31
To record interest expense
Reversing entries for (3) and (4)
Accounting I
N Likitwongkajon Page 34
(5) Account Receivable > Bad Debts Expenses
5.1 direct write-off method
1. To write off uncollectible accounts:
Dr. Bad Debts Expense xxx
Cr. Accounts Receivable xxx
Example: On December 12, Warden Co. writes off as uncollectible M. E.
Doran’s $200 balance.
General Ledger
Account Receivable 1xx
10,000
Allowance for Doubtful Accounts 1xx Bad Debts Expense 5xx
General Journal Page 5
Date Account Titles Ref. Debit Credit
Oct. 31
To record uncollectible
Accounting I
N Likitwongkajon Page 35
5.2 Allowance Method for Uncollectible Accounts
1. Companies estimate uncollectible accounts receivable.
2. To record estimated uncollectible:
Dr. Bad Debts Expense xxx
Cr. Allowance for Doubtful Accounts xxx
3. To write off uncollectible accounts:
Dr. Allowance for Doubtful Accounts xxx
Cr. Accounts Receivable xxx
4. To recovery of uncollectible accounts:
Dr. Accounts Receivable xxx
Cr. Allowance for Doubtful Accounts xxx
Example: Hampson Furniture has credit sales of $1,200,000 in 2011. Of this
amount, $200,000 remains uncollected at December 31. The credit manager
estimates that 12,000 of these sales will be uncollectible.
General Ledger
Account Receivable 1xx
200,000
Allowance for Doubtful Accounts 1xx Bad Debts Expense 5xx
400
Accounting I
N Likitwongkajon Page 36
General Journal Page 5
Date Account Titles Ref. Debit Credit
Dec. 31
To record estimated uncollectible
Balance Sheet (Partial)
October 31, 20x1
Assets
Current Assets :
Account Receivable
Less Allowance for Doubtful Accounts
On March 1, the financial vice-president of Hampson Furniture authorizes a
write-off of the $500 balance owed by R.A.Ware.
General Journal Page 5
Date Account Titles Ref. Debit Credit
March 1
To write off uncollectible
On July 1, R. A. Ware pays the $500 amount that Hampson had written off on
March 1.
General Journal Page 5
Date Account Titles Ref. Debit Credit
July 1
To recovery uncollectible account
To collect account receivable
Accounting I
N Likitwongkajon Page 37
Example: Accounting Cycle –(Step 5-9)
Pioneer Inc. Trial Balance
October 31, 20x1
Account Number Account Titles Debit Credit 101 Cash $15,200 102 Supplies 2,500 103 Prepaid insurance 600 111 Equipment 5,000 201 Note Payable 5,000 202 Accounts Payable 2,500 203 Unearned revenue 1,200 301 Capital-Smile 10,000 302 Retained Earnings 0 303 Dividends 500 401 Service revenues $10,000 501 Salary expense 4,000 502 Rent expense $900
Total $28,700 $28,700
Additional information:
a) On October 4, Company paid $600 for a one-year fire insurance policy.
b) An inventory count on October 31 reveals that $1,000 of supplies on hand.
c) Company estimates depreciation on the equipment to be $40 per month.
d) Unearned Revenue $1,200 on October 2 to be completed by December 31.
e) Company earned $200 for advertising services that had not been recorded.
f) A note payable Interest rate = 12%per year.
g) Last paid salaries on October 26; the next payment of salaries will not occur
until November 9. The employees receive $400 per day. (Oct.27 is Saturday
and Oct.28 is Sunday) Thus, accrued salaries at October 31 are $1,200 ($400 x
3 days).
Accounting I
N Likitwongkajon Page 38
Step 5: Adjusting Entries – Pioneer
General Journal Page 9
Date Account Titles Ref. Debit Credit
Oct. 31 Adjusting entries
a)
To record insurance expired
b)
To record supplies used
c)
To record depreciation expense
d)
To record revenue for service
provided
e)
To record revenue for service
provided
f)
To record interest on note
payable
g)
To record accrued salaries
Step 6: Adjusted trial balance – Pioneer
Accounting I
N Likitwongkajon Page 39
Pioneer Inc. Worksheet
October 30, 20x1
Acc. No.
Account Titles Trial Balance Adjustments Adjusted Trial Balance
Income Statement Balance Sheet
Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
101 Cash 15,200
102 Advertising Supplies 2,500
103 Prepaid Insurance 600
111 Office Equipment 5,000
201 Notes Payable 5,000
202 Accounts Payable 2,500
203 Unearned Revenue 1,200
301 Share Capital 10,000
302 Retained Earning 0
303 Dividends 500
401 Service Revenue 10,000
501 Salaries Expense 4,000
502 Rent 900
Totals 28,700 28,700
Accounting I
N Likitwongkajon Page 40
Step 7: Prepare financial Statement – Pioneer
Pioneer Income Statement
For the year ended October 31, 20x1 Revenues :
Expenses :
Pioneer Balance Sheet
October 31, 20x1 Assets
Current Assets :
Property, Plants and Equipment :
Total Assets
Liabilities and Owner’s Equity
Liabilities :
Owner’s Equity:
Total Liabilities and Owner’s Equity
Accounting I
N Likitwongkajon Page 41
Step 8: Closing Entries – Pioneer
General Journal Page 10
Date Account Titles Ref. Debit Credit
Dec. 31 Closing entries
(1)
To close revenue accounts
(2)
To close expense accounts
(3)
To close net income
(4)
To close dividend
Accounting I
N Likitwongkajon Page 42
Step 9: A Post-Closing Trial Balance – Pioneer
Pioneer Inc. Post-Closing Trial Balance
October 31, 20x1
Account Number
Account Titles Debit Credit
101 Cash
102 Supplies
Accounts Receivable
103 Prepaid insurance
111 Equipment
Accumulated Depreciation
201 Note Payable
202 Accounts Payable
203 Unearned revenue
Interest Payable
Salaries Payable
301 Share Capital-Ordinary
302 Retained Earnings
303 Dividend
401 Service revenues
501 Salary expense
502 Rent expense
Advertising Supplies Expense
Insurance Expense
Depreciation Expense
Interest Expense
Total
Accounting I
N Likitwongkajon Page 43
Additional Example
N&J prepared the following trial balance at December 30, 20x5:
N&J Trial Balance Dec 30, 20x5
Account Number
Account Titles Debit Credit
101 Cash $2,200 102 Accounts Receivable 7,500 103 Prepaid insurance 1,800 104 Supplies 1,350 110 Land 50,000 111 Building 137,500 112 Accumulated depreciation-
building $51,700
113 Equipment 90,100 114 Accumulated depreciation-
equipment 35,300
201 Accounts Payable 3,500 202 Unearned Rent 3,000 301 Capital 212,500 302 Withdrawals 10,000 401 Fees revenues 188,400 501 Salary and Wage expense 101,200 502 Advertising expense 58,200 503 Utilities expense 19,000 504 Repair expense 11,500 505 Miscellaneous expense 4,050
Total $494,400 $494,400
The data needed to determine year-end adjustments are as follows:
a. Accrued fees revenue at December 30 is $1,750. b. Insurance expired during the year is $800. c. Supplies on hand at December 30 are $650. d. Depreciation of building for the year is $1,620. e. Depreciation of equipment for the year is $3,500. f. Accrued salary and wage at December 30 are $1,050. g. Unearned rent at December 30 is $1,000.
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