Adjusting Entry
Adjusting Entry
Adjusting Entry
ENTRIES
MARISOL P. BAGONOC
CONTENTS
OBJECTIVES
Relate the concept of accrual method
of accounting to accruals & deferrals
2019 Explanation PR Dr Cr
Dec Salary expense 50 P1500
31 salary payable 1 P1500
recognition of
accrued salary
Exercises:
1. An office space has been leased to Texas Company for P5,000 per
month beginning Sept. 1, 2016. No payment has yet been received for
the month of November and December.
ADJUSTING ENTRY
Dec 31 Office supply 75 000
Office supply expense 75 000
adjustment to supply
expense
Exercises: Accrued
income/expense
• Prepare the necessary adjusting entries for Dec 31,
2019.
1. A bill to a client for service rendered on Dec.
remains unrecorded. The services were determined
to be worth P10 000.
2. A company is authorized to sell products on a 12%
commission basis. December sales amounted to be
worth P10 000.
3. Utility bills amounting to P7000
remained unpaid as of Dec 31.
4. Salaries earned by store clerks
amounting to P4000 remain unpaid as
of Dec. 31.
5. Unpaid property taxes for the last
quarter P14 000.
Answer
1. Accounts receivable P10 000
Service income P10 000
recognition of accrued income
• Adjusting entry
• Dec. 31, 2015 Unearned rent P60 000
Rent income P60 000
adjustment to advance rent
(200 000/10 mos=20 000x 3 mos)
Income Method
Cash P200,000
• Unearned rent income P200,000
Adjusting:
Dec. 31 Rent income P140 000
Unearned rent P140 000
adjustment to rent income
•Accruals- the accrued income &
accrued expense transactions.
•Deferrals- the prepaid expense &
unearned income transactions.
Exercises:
Prepare an adjusting entries on Dec. 31, 2019
1. Received P60 000 from a tenant on October 1 as an
advance payment for two years rent. Use liability method
2. Received P4500 on April 1 as one-year advance payment
of magazine subscription . Magazines are to be delivered on
a monthly basis. Use Liability method
3. Received P27000 on August 1 as eighteen months advance
payment of advertising from a customer. Liability method
Answer
1. Dec 31 Unearned rent P 7500
rent income P7500
adjustment to unearned rent
(60 000/24mos=2500x3mos=7500)
Cont.