Professional Documents
Culture Documents
Adjusting Entries
Sergs F. Sancon
Prepared
by:
Mr.
Accounts
1.
Prepaid
Expenses
Explanation
Original Entry
Adjusting Entry
Are
expenditures
paid for goods or
services that are not
yet
incurred
or
consumed.(e.g.
insurance,
rent,
supplies)
Assets Method
Prepaid
Expenses
xxx
Cash
xxx
Expense Method
Expenses
xxx
Expenses
xxx
Prepaid Expenses
xxx
Prepaid
xxx
Cash
xxx
Expenses
Expenses
xxx
2.
Accrued
Expenses
Items
already
recorded
as
expenses but not yet
paid.
(e.g.
salaries,
utilities, etc.)
Expenses
xxx
Accrued expenses
xxx
3.
Accrued
Income
Receivable
xxx
4.
Unearne
d Income
Payment is received
in advance prior to
delivery of goods or
services. (e.g. rent,
subscription, etc.)
Income
xxx
Liability Method
Cash
xxx
Unearned Income
xxx
Income Method
Cash
xxx
Unearned
xxx
Income
Income
xxx
Income
xxx
Income
xxx
5. Depreciat
ion
6. Doubtful
Accounts
or
Bad
Debts
Unearned Income
xxx
A systematic means
of allocating the cost
of long-lived assets
over its estimated
economic life.
Depreciation
xxx
Are
accounts
of
customers who do
not pay that they
promised to pay.
Depreciation
Expense
Accumulated
xxx
Page 2
Leo Randall Thompson, the owner of Day Spa Parlor, presented to you the trial balance of her
parlor to help her determine the net income for the year just ended.
DAY SPA PARLOR
Trial Balance
December 31, 2013
Debit
Cash on hand
60,000
Cash in bank
120,000
Accounts receivable
60,000
Notes receivable
20,000
Parlor supplies
87,000
Prepaid rent
43,000
Rental deposit
50,000
Equipments
Accumulated depreciation E
120,000
80,000
Building improvements
Accumulated depreciation BI
96,000
Credit
20,000
16,000
19,200
Accounts payable
50,000
40,000
400,000
Service Revenue
1,119,800
Advertising Expense
60,000
Salaries Expense
396,000
Commission Expense
200,000
Telephone Expense
30,000
Utilities Expense
93,000
Maintenance Expense
50,000
Rent Expense
100,000
Total
1,665,000
1,665,000
Additional information:
1. Leo Randall paid P43,000 on September 1, 2013 for 5 months rental of its parlor space.
2. All equipments, furniture and building improvements are depreciated at the rate of 10% per
annum.
3. The unearned service revenue amounting to P40,000 was received by the parlor on October 1,
2013 for services still to be rendered for a value client. Mr. Thompson confirmed that her
parlor already rendered services to said client amounting to P35,000.
4. Services rendered in the last three days of the year totaling P15,000 was not recorded by the
bookkeeper because no payment is made yet. The clients promised to pay their accounts in
the 1st week of January.
5. Commissions of attendants for the last three days of December amounting to P12,000 are to
be accrued.
6. Water consumption for the month of December amounting to P6,500 was not yet recorded but
the bookkeeper already scheduled the payment 1st week of January.
7. Telephone bills received on December 30, 2013 amounting to P4,800 was not yet recorded.
8. Inventory of parlor supplies showed P12,500 are unused at the end of the year.
Required:
a)
b.
c.
Prepare financial statements (Income statement, balance sheet and owners equity
statement).