会计英语培训资料（英文版）.ppt

Unit Four Accounting Cycle,(3) Adjustments,Objectives:,1 Explain how the matching concept relates to the accrual basis of accounting. 2 Explain why adjustments are necessary and list the characteristic of adjusting entries. 3 Journalize entries for accounts requiring adjustment. 4 Summarize the adjustment process and prepare an adjustment trial balance.,,一 accounting period → cash basis (received or paid) accrual basis (earned or relate): revenue recognition concept → matching principle GAAP require the use of the accrual basis , small service businesses may use the cash basis because they have few receivables and payables.,,The matching principle supports recording revenues and relate expenses in the same period. 二 At the end of an accounting period, some accounts in the ledger require updating. The journal entries that bring the accounts up to gate at the end of the accounting period are called adjusting entries.,三 Four typical adjusting entries:,Deferrals --------- are created by recording a transaction in a way that delays or defers the recognition of an expense or a revenue. ㈠ Deferred expenses (prepaid expenses) → become expense over time,,(1) supplies (2) prepaid insurance (3) prepaid advertising (4) prepaid interest ㈡ Deferred revenues (unearned revenue) → become revenues over time,,(1) unearned rent (2) tuition (3) annual retailer fee (4) premium (5) magazine subscriptions Accruals --------- are created by an unrecorded expense that has been incurred or an unrecorded revenue that has been earned.,,㈢ Accrued expenses (accrued liabilities) → expense have been incurred but not recorded (1) accrued wages (2) accrued interest on notes payable (3) accrued taxes,,㈣ Accrued revenues (accrued assets) →revenues earned but not recorded (1) fees for services (2) unbilled commissions (3) accrued interest on notes receivable (4) accrued rent,Summarize:,1 How do you tell the difference between deferrals and accruals? If cash is received or paid in the current period, but the revenue or expense relates to a future period, the revenue or expense is a deferred item. If cash will not be received or paid until a future period, but the revenue or expense relates to the current period, the revenue or expense is an accrued item.,,Current accounting period → ( cash received or paid ) ( revenue or expense incurred ) →future accounting period ( revenue or expense incurred ) ( cash received or paid ) 2 All adjusting entries affect at least one income statement account and one balance sheet account.,四 Examples:,1 Assuming that on December 31 the amount of supplies on hand is $760, the amount to be transferred from the asset account to the expense account is $1240.(supplies used is the amount of adjustment) Dr. Supplies Expense $1240 Cr. Supplies $1240,,2 The debit balance of $2400 in A prepaid insurance account represents a December 1 prepayment of insurance for 24 months. At the end of December the insurance for one month turn into reality. Dr. Insurance Expense $100 Cr. Prepaid Insurance $100,Attention:,(1) the balance of a prepaid (deferred) expense is an asset that will become an expense in a future period. (2) What is the effect of omitting adjusting entries? On the income statement, Supplies Expense and Insurance Expense will be understated by a total of $1340. On the balance sheet, Supplies and Prepaid Insurance will be overstated by a total of $1340.,,(3) Prepayments of expenses are sometimes made at the beginning of the period in which they will be entirely consumed. 3 According to A’s trial balance on December 31, the balance in the unearned rent account is $360. This represents the receipt of three months’ rent on December 1 for Dec. Jan. Feb, At the end of December $120 rent should be turn into reality.,,Dr. Unearned Rent $120 Cr. Rent Revenue $120 In the case of wages expense, if the last day of a paid period is not the last day of the accounting period, the accrued wages expense and the related liability must be recorded in the accounts by an adjusting entry.,,4 At the end of December, accrued wages for A were $250. Dr. Wages Expense $250 Cr. Wages Payable $250 (1) wages are paid on the second and fourth Fridays for the two-week period ending on those Fridays. The payments were $950 on December 13 and $1200 on December 27.,,(2) The wages accrued for Monday and Tuesday, December 30 and 31, are $250. (3) Wages paid on Friday, January 10,totals $1275.,,,13 ------- wages expense (paid) $950 27 ------- wages expense (paid) $1200 30,31 --wages expense (accrued) $250 Jan, 10: Dr. Wages Payable $250 Cr. Cash $250,,5 Assume that A signed an agreement with B on December 15. The agreement provides that A will be on call to answer computer questions and render assistance to B’s employees. The services provided will be billed to B on the fifteenth of each month at a rate of $20 per hour. As of December 31, A had provided 25 hours of assistance to B.,,Dr. Accounts Receivable $500。