ADJUSTING JOURNAL ENTRIES

Accrued Expense
Periodicity

Operating life
of an enterprise may be divided
into time periods.
July 2014 August 2014
M T W T F S S M T W T F S S
1 2 3 4 1 2 3
5 6 7 8 9 10 11 4 5 6 7 8 9 10
12 13 14 15 16 17 18
11 12 13 14 15 16 17
19 20 21 22 23 24 25
18 19 20 21 22 23 24
26 27 28 29 30 31
25 26 27 28 29 30 31
Think
As far as financial reporting is concerned,
management should make a decision regarding
two important areas:

How long should the enterprise’s regular reporting

period be?

If the management decides to use a 12-month

period, should it use calendar or a fiscal year?
End of Period Adjustment

Accrued Expenses Accrued Income

Prepaid Expense Unearned Income

Depreciation Bad Debts

 Accrued Expenses

Expenses already incurred

but not yet paid.
 M T W T F S S
1 2 3 4 5
J
6 7 8 9 10 11 12
A 13 14 15 16 17 18 19
N 20 21 22 23 24 25 26
27 28 29 30 31

M T W T SF S
F 1 2
3 4 5 6 7 8 9
P2,500 E 10 11 12 13 14 15 16
B 17 18 19 20 21 22 23
24 25 26 27 28
 M T W T F S S
1 2 3 4 5
J
6 7 8 9 10 11 12
A 13 14 15 16 17 18 19
N 20 21 22 23 24 25 26
27 28 29 30 31

M T W T SF S
F 1 2
P8,500 3 4 5 6 7 8 9
E 10 11 12 13 14 15 16
B 17 18 19 20 21 22 23
24 25 26 27 28
 J a n u a r y
The following
January bills were
received and M T W T F S S
unpaid as of
1 2 3 4 5
January 31, 2014:
•Electricity 6 7 8 9 10 11 12
amounting to
P19,000 13 14 15 16 17 18 19
•Water amounting 20 21 22 23 24 25 26
to P2,500
27 28 29 30 31
 APRIL The office employee earns
P500 per day. He was paid
M T W T F S S every Friday for 5 day
work that begins on
1 2 3 4 5 6 Monday. This year, April
7 8 9 10 11 12 13 30 fell on a Wednesday,
and the employee both
14 15 16 17 18 19 20 worked on Monday,
Tuesday and Wednesday.
21 22 23 24 25 26 27 How much salaries should
be accrued on April 30?
28 29 30
Seatwork
8.1.
Accrued Expense

Prepare the adjusting journal entries on December

31, 2014:
a. Electric bill received from Meralco on
December 29 in the amount of P4,500 will be
paid in the first week of January the following
year.
b. Worker’s wages for the six-day week is P12,000
payable every Saturday. December 31 is on a
Tuesday.
Accrued Expense

Seatwork 8.1
a. Electric bill received from Meralco on December
29 in the amount of P4,500 will be paid in the
first week of January the following year.

Utilities expense P4,500

Utilities payable P4,500
Accrued Expense

Seatwork 8.1
b. Worker’s wages for the six-day week is P12,000
payable every Saturday. December 31 is on a
Tuesday.

Salaries expense P4,000

Salaries payable P4,000
Seatwork
8.2.
Accrued Expense

Prepare the adjusting journal entries on December

31, 2014:
a. Secretaries’ salaries for the five-day week is
P4,000 payable every Friday. December 31 is a
Wednesday.
b. Telephone bill received last December 27 in the
amount of P1,899 will be paid on January 10 of
the following year.
Accrued Expense

Seatwork 8.2
a. Secretaries’ salaries for the five-day week is
P4,000 payable every Friday. December 31 is a
Wednesday.

Salaries expense P2,400

Salaries payable P2,400
Accrued Expense

Seatwork 8.2
b. Telephone bill received last December 27 in the
amount of P1,899 will be paid on January 10 of
the following year.

Utilities expense P1,899

Utilities payable P1,899
Seatwork
8.3.
Accrued Expense

a. Morning Sun Co. pays its employees weekly every

Fridays. If the five office workers are paid a minimum
wage of P404 per day and December 31 falls on a
Wednesday, the adjusting journal entry on December
31 should be:

a. Debit Wages expense P1,212

b. Debit Wages payable P1,212
c. Debit Wages expense P6,060
d. Debit Wages payable P6,060
Accrued Expense

b. On December 1, 2014, Morning Dancer borrowed

P500,000 from PNB. Interest on this loan is 1% per
month, and is due every June 1. Which of the following
items would appear on Morning Dancer’s December
31, 2014 statement of financial position?

a. Interest expense of P5,000

b. Unearned interest of P5,000
c. Prepaid interest of P5,000
d. Interest payable of P5,000
Accrued Expense
Seatwork 8.3
c. On August 1, the company borrowed P250,000
from Metrobank at 12% per annum. No interest
has been recorded from this note. Provide the
adjusting journal entry.

Interest expense P 12,500

Interest payable P 12,500
Topic next meeting:
Accrued income