Professional Documents
Culture Documents
International Accounting
-1-
Accrued expense ... accumulates, i.e. service is being used but will not
be paid for until it is due;
First, a service has been used and thus expense has been incurred. That
expense and liability need to be recorded;
Later, when the bill is due, it is paid off and that payment needs to be recorded.
Accrued revenue ... accumulates, i.e. work is being performed but the
customer will not pay until invoice is due;
First, work has been performed and thus revenue has been earned. That
revenue and asset need to be recorded;
Later, when the invoice is issued, it is paid for by the customer and that payment
needs to be recorded.
First
Later
AccruedExpense
ExpenseRecognized CashPaid
AccruedRevenue
RevenueRecognized CashReceived
-2-
First, a service has been used and thus expense has been
incurred. That expense and liability need to be recorded;
Later, when the bill is due, it is paid off and this payment needs to
be recorded.
First
ExpenseAccout
Credi t AccountsPayable
Debi t
Later
$XYZ
$XYZ
AccountsPayable
Cash
Credi t
Debi t
-3-
$XYZ
$XYZ
Later
ExpenseAccout
Credi t AccountsPayable
Debi t
$XYZ
$XYZ
AccountsPayable
Cash
Credi t
$XYZ
$XYZ
Debi t
(A) WW estimates that as of the end of December $1,200 of Wages Expense has
accrued. (Wages for each month are paid out on the 5th of the following month).
WagesExpense
Debit
+
1,200
Credit
WagesPayables
Debit
Credit
+
1,200
(B) On January 5th wages are paid, as per accrual estimate from year end.
WagesPayables
Debit
1,200
-4-
Credit
+
Cash
Debit
+
Credit
1,200
Later
ExpenseAccout
Credi t AccountsPayable
Debi t
$XYZ
$XYZ
AccountsPayable
Cash
Credi t
Debi t
$XYZ
$XYZ
(A) WW estimates that as of the end of December $125 of Utilities Expense has
accrued. (Bills for each month are received on the 15th of the following month).
UtilitiesExpense
Debit
+
125
Credit
UtilitiesPayables
Debit
Credit
+
125
(B) On January 15th the bill for $175 is received, i.e. larger than estimated
(expensed for at the end of December). The additional amount also needs to
UtilitiesExpense
UtilitiesPayables
Cash
+
=
be expensed.
Debit
+
50
Credit
-5-
Debit
125
Credit
+
Debit
+
Credit
175
First, work has been performed and thus revenue has been
earned. That revenue and asset need to be recorded;
Later, when the invoice is issued, it is paid for by the customer and
this payment needs to be recorded.
First
AccountsReceiv.
Revenue
Credi t
Debi t
Later
$XYZ
$XYZ
Cash
Credi t AccountsReceiv.
Debi t
-6-
$XYZ
$XYZ
Later
AccountsReceiv.
Revenue
Credi t
Debi t
$XYZ
$XYZ
Debi t
Credi t
Cash
AccountsReceiv.
$XYZ
$XYZ
(A) WW started providing services for a new client in mid December and by the
end of the year $1,400 worth of services have been performed.
A/R
Debit
+
1,400
=
Credit
Revenue(s)
Debit
Credit
+
1,400
(B) On January 15th WW issues an invoice for $2,600 which is paid at the end of
January. The additional amount also creates a revenue.
Cash
Debit
+
2,600
A/R
Credit
-7-
Debit
+
+
Credit
1,400
Revenue(s)
Debit
Credit
+
1,200
WinstonWolfeServicesInc.
AdjustedTrialBalanceII($s)
December31,20X5
Debit
Adjusted TB
WinstonWolfeServicesInc.
AdjustedTrialBalance($s)
December31,20X5
Debit
Cash
A/R
OfficeSupplies
ComputerWorkstation
AccumulatedDepreciation
PrepaidInsurance
A/P
Debt
UnearnedRevenue
CommonStock
Dividends
Revenue(s)
Expense(s)
DepreciationExpense
InsuranceExpense
SuppliesExpense
Total
Cash
A/R
OfficeSupplies
ComputerWorkstation
AccumulatedDepreciation
PrepaidInsurance
A/P
WagesPayables
UtilitiesPayables
Debt
UnearnedRevenue
CommonStock
Dividends
Revenue(s)
Expense(s)
DepreciationExpense
WagesExpense
UtilitiesExpense
InsuranceExpense
SuppliesExpense
Total
Credit
19,450
200
1,500
4,000
800
500
2,000
3,000
900
23,000
3,000
1,500
750
800
500
500
31,200
31,200
-8-
Credit
19,450
1,600
1,500
4,000
800
500
2,000
1,200
125
3,000
900
23,000
3,000
2,900
750
800
1,200
125
500
500
33,925
33,925
-9-