Adjusting Entry Student
Adjusting Entry Student
Adjusting Entry Student
ENTRIES
MARISOL P. BAGONOC
OBJECTIVES
CONTENTS
2019 Explanation PR Dr Cr
Dec Salary expense 50 P1500
31 salary payable 1 P1500
recognition of
accrued salary
Exercises 1:
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.
10. Nikon Company has an outstanding loan with HBC Bank amounting to
P500,000. Interest of P10,000 has not yet been recorded.
Adjusting Entry
Date Particulars PR Dr Cr
2019 Office supplies expense 502 P25 000
Dec 31
Office supplies P25 000
adjustment to
prepaid supplies
Prepaid Expense- the asset paid
in advance but not yet consumed.
• Asset Method
• Ex. On March 15, 2016 Smith Agency purchased office
supplies P100 000. At the end of the year record
shows that 25% worth of supplies have been used.
• Mar 15 Office Supplies P100 000
• Cash P100 000
• purchased of prepaid item
• Office supplies expense 25,000
• Office supplies 25,000
Expense Method
Date Particulars PR Dr Cr
2019 Office supplies expense 502 P100 000
March 15 Cash P100 000
purchased of prepaid
item
ADJUSTING ENTRY
Dec 31 Office supply 75 000
Office supply expense 75 000
adjustment to supply
expense
Exercises 2: 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.
IW: Prepaid expense
• Prepare an adjusting entry on Dec 31, 2019
1. Paid 30 months newspaper subscription for P15 000 on
Sept 2019. Use the Asset method
2. Paid 5 years insurance premium. the monthly premium is
P1045.
3. Paid P5 600 for office supplies. 40% of the stock was used
as of Dec 31. Use Asset method
UNEARNED INCOME
• Refers to cash that is received in advance but not yet
earned. Ex. an advance deposit for a birthday party
in a restaurant.
• LIABILITY METHOD
• Ex. Oct. 1, 2015 Maslow Co. received from a tenant
an advance rent payment of P200 000 representing
10 months rent.
• Cash P200,000
• Unearned rent P200,000
• 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 3:
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
Depreciation
•the systematic allocation of the
depreciable cost of an asset over its
useful life. the decrease in value of an
asset.
2 Kinds of Depreciation
• 1. Physical depreciation- caused by wear & tear, forces of
nature, etc.
• 2. Functional depreciation- caused by an obsolescense of an
asset.
• Straight Line Method
• Depreciation= Cost- scrap value
Estimated Useful life
Example:
• Purchased an equipment on Jan 1 2016 w/ a
cost of P50 000 and has an estimated useful
life of 5 years.
• Dep.= P50 000
• 5yrs
• = P10 000
Scrap value/salvage
value/residual value
• = the estimated selling price of the asset at
the end of its useful life.
• Ex. if the asset is purchased on August 15
w/ a cost of P50 000, no scrap value, EUL is
5 years.
• (50 000/5yrs=10 000 x 4.5/12=P3750)
•Depreciation rate= 100%
Estimated useful life
=1.00
5
= 20%
Example:
• Berry Co. purchased an office equipment on Jan. 1, 2019 for
P105 000 w/ a salvage value of P5000 at the end of its
useful life of 5 years.
Dep.= P105 000-5000
5yrs
= P20 000
Dec. 31 Depreciation-office equipment P20 000
Accumulated depreciation P20000
depreciation for the year
Doubtful Accounts Expense
• =also known as past due accounts, an
uncollected accounts at the end of the year.
• Dec 31 Doubtful accounts P
• Allowance for doubtful accounts P
Writing Off of the worthless
accounts receivable
•= removal of customer accounts from the
books
•Date Allowance for doubtful accounts
•Accounts receivable
Recovery of previously written-
off accounts receivable
• Date Accounts receivable
Allowance for doubtful accounts
THANK YOU