Professional Documents
Culture Documents
3-1
Matching Principle
3-5
1
The Adjusting Process
Under the accrual basis, at the end of the
accounting period some of the accounts need
updating for the following reasons:
1. Some expenses are not recorded daily.
2. Some revenues and expenses are incurred
as time passes rather than as separate
transactions.
3. Some revenues and expenses may be
unrecorded.
3-6
1
Types of Accounts
Requiring Adjustment
3-8
1
Types of Accounts
Requiring Adjustment
1
Types of Accounts
Requiring Adjustment
3-10
1
Types of Accounts
Requiring Adjustment
3-11
Follow
My Example 6-1
a. Accrued expense
b. Prepaid expense
c. Unearned revenue
d. Accrued revenue
For Practice: PE 3-2A, PE 3-2B
3-17
3-12
2
Exhibit 3
3-13
Prepaid Expenses
NetSolutions Supplies account has a balance of
$2,000 in the unadjusted trial balance. Some of
these supplies have been used. On December 31,
a count reveals that $760 of supplies are on hand.
Supplies (balance on trial balance) $2,000
Supplies on hand, December 31
760
Supplies used
$1,240
3-14
Prepaid Expenses
3-15
Unearned Revenues
3-17
Accrued Revenues
NetSolutions signed an agreement with
Danker Co. on December 15 to provide
services at $20 per hour. As of December 31,
NetSolutions had provided 25 hours of
assistance.
3-19
Accrued Expenses
NetSolutions pays it employees biweekly.
During December, NetSolutions paid wages of
$950 on December 13 and $1,200 on December
27. As of December 31, NetSolutions owes
$250 of wages to employees for Monday and
Tuesday.
3-21
Fixed Assets
Depreciation
2
Normal titles for fixed asset accounts and their
related contra asset accounts are as follows:
Fixed Asset
Contra Asset
Land
Buildings
Store Equipment
Office Equipment
3-25
3-26
4,250
Depreciation on equipment.
For Practice: PE 3-7A, PE 3-7B
3-52
3-27
3-28