Beruflich Dokumente
Kultur Dokumente
International Accounting
-1-
Examples:
Cash
Credit
Debit
+
Credit
1,000
-3-
Credit
UnearnedRevenue
Debit
Credit
+
1,200
WinstonWolfeServicesInc.
TrialBalanceSheet($s)
December31,20X5
Debit
Cash
A/R
OfficeSupplies
ComputerWorkstation
PrepaidInsurance
A/P
Debt
UnearnedRevenue
CommonStock
Dividends
Revenue(s)
Expense(s)
Total
-5-
Credit
19,450
200
2,000
4,000
1,000
2,000
3,000
1,200
23,000
3,000
1,200
750
30,400
30,400
Since the economic benefit (from these assets) will eventually expire;
these asset accounts will have to be reduced causing an expense to be
recorded.
Since the economic benefit (from these liabilities) will eventually arise;
these liability accounts will have to be reduced causing a revenue to be
recorded.
DeferredExpense
First
Later
CashPaid
ExpenseRecognized
DeferredRevenue CashReceived
-6-
RevenueRecognized
Deferred Expenses
Recording (expensible) items as assets means ... delaying
(deferring) the recording of an expense until later;
Debi t
Later
$XYZ
$XYZ
ExpenseAccount
AssetAccout
Credi t
Debi t
-7-
$XYZ
$XYZ
Later
AssetAccout
Cash,A/P,etc.
Credi t
Debi t
$XYZ
$XYZ
ExpenseAccount
AssetAccout
Credi t
Debi t
$ABC
$ABC
15. (A) Halfway through the year WW takes out a business insurance coverage
and (pre)pays $1,000 cash for it. Its will cover WW for the next twelve months.
PrepaidInsurance
Debit
+
1,000
Credit
Cash
=
Debit
+
Credit
1,000
15. (B) By the end of the year, half the insurance policy would have expired. An
adjusting entry for $500 must be made in order to adjust the asset account.
InsuranceExpense
Debit
+
500
-8-
Credit
PrepaidInsurance
Debit
+
Credit
500
Debi t
Later
$XYZ
$XYZ
ExpenseAccount
AssetAccout
Credi t
Debi t
$ABC
$ABC
(A) The Office Supplies account on the trial balance indicates a balance of $2,000.
(B) Inventory taken at the end of the year indicates that the cost of the Office
Supplies account still in possession is $1,500.
$500 worth of Office Supplies have therefore been used up and have become a
period expense. Adjusting entry is required.
SuppliesExpense
Debit
+
500
Credit
OfficeSupplies
Debit
+
Credit
500
Supplies Expense (not originally on the trial balance), will now appear there.
-9-
Credit will be recorded not directly to the PP&E account, but to the separate
(though related) account called Accumulated Depreciation.
I.e. there will be two accounts for PP&E in the ledger.
Net of which will give us the ending balance of the PP&E account.
-10-
Unlike Office Supplies (where inventory count will tell exactly what is
left in the account);
Unlike Prepaid Insurance (where contract will tell exactly what period of
coverage is left);
For PP&E estimates must be made for:
Debi t
Later
$XYZ
$XYZ
Depr.Expense
Credi t Acc.Depreciation
Debi t
-11-
$ABC
$ABC
Debi t
Later
$XYZ
$XYZ
Depr.Expense
Credi t Acc.Depreciation
Debi t
$ABC
$ABC
(A) The Equipment (Computer Workstation) account on the trial balance indicates
a balance of $4,000.
(B) Assuming the purchase was made at the beginning of the year, useful life of 5
years, no salvage value and straight line depreciation, Depreciation Expense of
$4,000 / 5 = $800 must be recorded.
Depreciation
Expense
Debit
+
800
-12-
Credit
Accumulated
Depreciation
Debit
Credit
+
800
-13-
19,450
200
1,500
4,000
800
3,200
500
24,850
Debi t
Later
$XYZ
$XYZ
UnearnedRev.
Credi t RevenueAccount
Debi t
-14-
$ABC
$ABC
Later
Cash
UnearnedRev.
Credi t
Debi t
$XYZ
$XYZ
UnearnedRev.
Credi t RevenueAccount
Debi t
$ABC
$ABC
16. (A) On October 1st, WW receives $1,200 advance payment from a customer for
consulting work to be performed (equally) over the next 12 months.
Cash
Debit
+
1,200
Credit
UnearnedRevenue
Debit
Credit
+
1,200
16. (B) By the end of the year, one quarter of the Unearned Revenue would
become earned. An adjusting entry for $300 must be made in order to adjust
UnearnedRevenue
Revenue(s)
=
the liability account.
-15-
Debit
300
Credit
+
Debit
Credit
+
300
Cash
A/R
OfficeSupplies
ComputerWorkstation
AccumulatedDepreciation
PrepaidInsurance
A/P
Debt
UnearnedRevenue
CommonStock
Dividends
Revenue(s)
Expense(s)
DepreciationExpense
InsuranceExpense
SuppliesExpense
Total
Credit
19,450
200
2,000
4,000
1,000
2,000
3,000
1,200
23,000
3,000
1,200
750
30,400
WinstonWolfeServicesInc.
AdjustedTrialBalance($s)
December31,20X5
Debit
30,400
-16-
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
-17-