Chapter 6 Adjusting Entries

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Chapter 6

Adjusting Entries

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General Journal

Date Account Titles Ref. Debit Credit (a) Cash (+A) 10,000

Common Stock (+SE) 10,000 Stockholder invests into the

business

Assets = Liabilities + SE

Ref. Cash + Supplies + Equip ment = Accounts Payable +

Notes

Payable + Common Stock

(a) +10,000 = +10,000

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Step 1: Analyze

transactions and source documents.

Liabilities Equity Assets = +

Step 2: Apply double-entry accounting

(Left side) (Right side) Debit Credit

T- Account

ACCOUNT NAME: ACCOUNT No. Date Description PR Debit Credit Balance

Step 4: Post entry to ledger

GENERAL JOURNAL Page 123

Date Description

Post.

Ref. Debit Credit

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Revenues are

recognized when cash is received and

expenses are recorded

when cash is paid.

Non-GAAP

Revenues are

recognized when

earned and expenses

are recognized when

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Handout 20

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Deferred

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+ Cash - Cash Deferred Accrued Now Deferred +/ - Cash Accrued +/ - Cash

Paid (or received) cash before

expense (or revenue) recognized

Paid (or received) cash after

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Deferred Unearned Revenue

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Deferred Unearned Revenue

Accrued Accrued Revenue

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Deferred Unearned Revenue Prepaid Expense

Accrued Accrued Revenue

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Deferred Unearned Revenue Prepaid Expense Plants &Equipment (Accumulated Depre.)

Accrued Accrued Revenue

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Deferred Unearned Revenue Prepaid Expense Plants &Equipment (Accumulated Depre.) Supplies

Accrued Accrued Revenue

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Deferred Unearned Revenue Prepaid Expense Plants &Equipment (Accumulated Depre.) Supplies

Accrued Accrued Revenue

……..Receivable

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Chapter 6

Adjusting Entries

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Deferred Unearned Revenue Prepaid Expense Plants &Equipment (Accumulated Depre.) Supplies

Accrued Accrued Revenue

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Deferred Unearned Revenue Prepaid Expense Plants &Equipment (Accumulated Depre.) Supplies

Accrued Accrued Revenue

……..Receivable Accrued Expense ……..Payable

L

A

A

L

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1. Resets revenue,

expense and dividend account balances to zero at the end of the period.

2. Helps summarize a period’s revenues and expenses in the

Income Summary

account.

Identify accounts for closing.

Record and post closing entries.

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Temporary Accounts Income Summary Expenses Dividend s Permanent Accounts Liabilities Equity

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Close Credit Balances in Revenue

Accounts to Income Summary.

Close Debit Balances in Expense

accounts to Income Summary.

Close Income Summary to

Retained Earnings.

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Decorating Revenue 120,400 120,400 Investment Income 1,200 1,200 Income Summary

R

EVENUE

A

CCOUNTS TO

I

NCOME

S

UMMARY

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Income Summary

73,110

121,600

48,490

Income Tax Expense

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Income Summary

73,110

121,600

48,490

Income Tax Expense

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Retained Earnings Income Summary

73,110

121,600

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Retained Earnings

Dividends

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Retained Earnings

Dividends

750

750

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List of permanent accounts and

their balances after posting closing

entries.

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response to accrued assets and accrued liabilities that were created by adjusting entries at the end of a reporting period. The purpose of reversing entries is to simplify a company’s recordkeeping.

We will now see how the accounting for our payroll accrual will be handled with and

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Deferred Unearned Revenue Prepaid Expense Plants &Equipment (Accumulated Depre.) Supplies

Accrued Accrued Revenue

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Figure

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References

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