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Financial accounting chapter 03 adjusting accounts IFRS kế toán tài chính doanh nghiệp, chương 03, phương pháp điều chỉnh tài khoản kế toán, international financial reporting standards. tiêu chuẩn quốc tế về báo cáo kế toán tài chính.
3-1 Financial Accounting IFRS Edition, 2e Weygandt Kimmel Kieso Preview of Chapter 3 3-2 Cash-Basis Accounting Revenues recognized when cash is received. Expenses recognized when cash is paid. Cash-basis accounting is not in accordance with International Financial Reporting Standards (IFRS). Accrual- vs. Cash-Basis Accounting LO 2 Explain the accrual basis of accounting. Timing Issues 3-3 Accrual-Basis Accounting Transactions recorded in the periods in which the events occur. Revenues are recognized when the services are performed, rather than when cash is received. Expenses are recognized when incurred, rather than when paid. Accrual- vs. Cash-Basis Accounting LO 2 Explain the accrual basis of accounting. Timing Issues 3-4 Revenue Recognition Principle Recognizing Revenues and Expenses LO 2 Explain the accrual basis of accounting. Recognize revenue in the accounting period in which the performance obligation is satisfied. In a service enterprise, revenue is considered to be earned at the time the service is performed. Timing Issues 3-5 Expense Recognition Principle Recognizing Revenues and Expenses LO 2 Explain the accrual basis of accounting. Match expenses with revenues in the period when the company makes efforts to generate those revenues. “Let the expenses follow the revenues.” Timing Issues 3-6 1. Prepaid Expenses. Expenses paid in cash before they are used or consumed. Deferrals 3. Accrued Revenues. Revenues for services performed but not yet received in cash or recorded. 4. Accrued Expenses. Expenses incurred but not yet paid in cash or recorded. 2. Unearned Revenues. Cash received before services are performed. Accruals Illustration 3-2 Categories of adjusting entries The Basics of Adjusting Entries LO 4 Identify the major types of adjusting entries. Types of Adjusting Entries 3-7 Payment of cash, that is recorded as an asset because service or benefit will be received in the future. insurance supplies advertising Cash Payment Cash Payment Expense Recorded Expense Recorded BEFORE rent equipment buildings Prepayments often occur in regard to: LO 5 Prepare adjusting entries for deferrals. The Basics of Adjusting Entries Prepaid Expenses 3-8 Illustration: Pioneer Advertising Agency purchased supplies costing $2,500 on October 5. Pioneer recorded the payment by increasing (debiting) the asset Supplies. This account shows a balance of $2,500 in the October 31 trial balance. An inventory count at the close of business on October 31 reveals that $1,000 of supplies are still on hand. Supplies 1,500 Supplies expense 1,500Oct. 31 LO 5 Prepare adjusting entries for deferrals. The Basics of Adjusting Entries 3-9 Illustration: On October 4, Pioneer Advertising paid $600 for a one-year fire insurance policy. Coverage began on October 1. Pioneer recorded the payment by increasing (debiting) Prepaid Insurance. This account shows a balance of $600 in the October 31 trial balance. Insurance of $50 ($600 ÷ 12) expires each month. Prepaid insurance 50 Insurance expense 50Oct. 31 LO 5 Prepare adjusting entries for deferrals. The Basics of Adjusting Entries 3-10 Receipt of cash that is recorded as a liability because service has not be performed. Rent Airline tickets Cash Receipt Cash Receipt Revenue Recorded Revenue Recorded BEFORE Magazine subscriptions Customer deposits Unearned revenues often occur in regard to: LO 5 Prepare adjusting entries for deferrals. The Basics of Adjusting Entries Unearned Revenues [...]... and credit balances in the ledger 3-24 Prepared after all adjusting entries are journalized and posted Is the primary basis for the preparation of financial statements LO 7 Describe the nature and purpose of an adjusted trial balance Illustration 3-25 3-25 Preparing Financial Statements Financial Statements are prepared directly from the Financial Statements are prepared directly from the Adjusted... Advertising Agency recognized $200 for advertising services performed but not recorded Oct 31 Accounts receivable 200 Service revenue 200 On November 10, Pioneer receives cash of $ 200 for the services performed Nov 10 Cash 200 Accounts receivable 3-13 200 LO 6 Prepare adjusting entries for accruals The Basics of Adjusting Entries Accrued Expenses Expenses incurred but not yet paid in cash or recorded... 3-14 Rent Interest Salaries LO 6 Prepare adjusting entries for accruals The Basics of Adjusting Entries Illustration: Pioneer Advertising signed a three-month note payable in the amount of $5,000 on October 1 The note requires Pioneer to pay interest at an annual rate of 12% Illustration 3-17 Oct 31 Interest expense Interest payable 3-15 50 50 LO 6 Prepare adjusting entries for accruals Team Quiz... on August 1, 2014 At the end of August 2014, management attempted to prepare monthly financial statements The following information relates to August Prepare the adjusting journal entries needed at August 31, 2014 (Amounts are in Chinese yuan.) 3 Revenue for services performed but unrecorded for August totaled ¥11,000 Accounts receivable Service revenue 3-20 11,000 11,000 LO 6 Team Quiz #2 3-21 3-22... Prepare adjusting entries for deferrals The Basics of Adjusting Entries Accrued Revenues Revenues for services performed but not yet received in cash or recorded Revenue Recorded BEFORE Cash Receipt Accrued revenues often occur in regard to: 3-12 Interest Rent Services performed LO 6 Prepare adjusting entries for accruals The Basics of Adjusting Entries Illustration: In October Pioneer Advertising... wages payable 3-18 8,000 8,000 LO 6 Micro Computer Services Inc began operations on August 1, 2014 At the end of August 2014, management attempted to prepare monthly financial statements The following information relates to August Prepare the adjusting journal entries needed at August 31, 2014 (Amounts are in Chinese yuan.) 2 At August 1, the company borrowed ¥300,000 from a local bank on a 15-year mortgage... Basics of Adjusting Entries Illustration: Pioneer Advertising received $1,200 on October 2 from R Knox for advertising services expected to be completed by December 31 Unearned Service Revenue shows a balance of $1,200 in the October 31 trial balance Analysis reveals that the company earned $ 400 of those fees in October Oct 31 Unearned service revenue Service revenue 3-11 400 400 LO 5 Prepare adjusting. .. Quiz #1 3-16 B A B C D C A D 3-17 Micro Computer Services Inc began operations on August 1, 2014 At the end of August 2014, management attempted to prepare monthly financial statements The following information relates to August Prepare the adjusting journal entries needed at August 31, 2014 (Amounts are in Chinese yuan.) 1 At August 31, the company owed its employees ¥8,000 in salaries and wages that... Statements are prepared directly from the Financial Statements are prepared directly from the Adjusted Trial Balance Adjusted Trial Balance Income Statement 3-26 Retained Earnings Statement Statement of Financial Position LO 7 Describe the nature and purpose of an adjusted trial balance Illustration 3-26 3-27 LO 7 Illustration 3-27 3-28 LO 7 Homework #1 3-29 3-30 Homework #2 3-31 3-32 3-33 . 3-1 Financial Accounting IFRS Edition, 2e Weygandt Kimmel Kieso Preview of Chapter 3 3-2 Cash-Basis Accounting Revenues recognized when cash is received. Expenses. paid. Cash-basis accounting is not in accordance with International Financial Reporting Standards (IFRS) . Accrual- vs. Cash-Basis Accounting LO 2 Explain the accrual basis of accounting. Timing. performed. Accruals Illustration 3-2 Categories of adjusting entries The Basics of Adjusting Entries LO 4 Identify the major types of adjusting entries. Types of Adjusting Entries 3-7 Payment of cash, that