AccountingBasics英语会计基础教学.ppt

AMonday11:3041-203 BMonday15:3019-G006 CWednesday12:3019-2043 DThursday9:3019-G006 EThursday12:3019-2085 FFriday12:3019-G007 Dont forget your PASS Session! .au/student/services/pass In Autumn 2011, students who regularly* attended PASS scored 11 marks higher on average than non-attending students. Students who did not attend PASS were also 5 times as likely to fail. Chapter 3: Adjusting the accounts Week 3 2 BEFORE WE START. C = CREDIT D = DEBIT Normal balance of these accounts is a debit. To increase balance debit again, to decrease credit out of the account. Normal balance of these accounts is a credit. To increase balance credit again, to decrease debit out of the account. Before we start 4 DRD+A+X=C+I+LCR oWhat is the normal balance of nAccounts receivable? nAccounts payable? nMachinery? nTax expense? nDividends/Drawings? nShare capital? nRetained earnings? nSales revenue? Before we start oLast week we looked at transactions analysis, journal entries and general ledger accountsElena Lee example 5 Basic analysis Debit-credit analysis Transaction 1 October, office rent for October is paid in cash, $1800 The expense Rent is increased $1800 because the payment pertains only to the current month; the asset Cash is decreased $1800 Debits increase expenses: debit Rent Expense $1800 Credits decrease assets: credit Cash $1800 Before we start 6 Journal entry Posting Debit-credit analysis Debits increase expenses: debit Rent Expense $1800 Credits decrease assets: credit Cash $1800 Oct 1 Rent Expense 601 1800 Cash 101 1800 (Paid October rent) Cash 101 Oct 1 800 Rent Expense 601 Oct 1 1800 This week 7 Accrual versus cash basis of accounting Revenue recognition criteria Expense recognition criteria Types of adjusting entries Prepayments Accruals Adjusted trial balance Worksheets Financial statements from worksheets Accrual versus cash basis of accounting Cash-based accountingAccrual-based accounting 8 Revenue recognised when the cash is received or paid. Expenses recognised when the cash is received or paid Revenue recognised when goods and services are provided Expenses recognised when assets are consumed or liabilities incurred Cash versus accrual basis 9 Accrual basis Income example: assume Penny received $20,000 in cash for sales during 2011 and charged clients $2,400 which was to be paid in the following year. How much revenue should Penny record for 2011? Revenue for 2010 would be $22,400 Why? Sales Cash $20,000 Sales Accounts receivable $ 2,400 Total sales for 2011$22,400 Cash versus accrual basis 10 Accrual basis Expenses example: Pennys phone bill for March was $400 but she doesnt receive the bill until April. When should Penny record the telephone expense? The $400 is still a March expense because this is the period in which the expense was incurred. The actual cash wont go out until April, but the expense is still a March expense. Why do we need adjusting entries? 11 Its a timing issue and related to the period assumption. Because sometimes transactions effect two or more accounting periods we need to make sure income and expenses are recorded in the correct period We need to make sure that asset and liability balances are accurately reflected at the end of the accounting period Adjusting entries occur after the transactions have been recorded and posted, but before the financial statements are prepared Types of adjusting entries 12 Types of adjusting entries 13 Adjusting entries 14 One side of the adjusting journal entry affects an account reported in the income statement (ie revenue or expense) and the other side of the entry affects an account recorded in the balance sheet (asset or liability) The cash account is never adjusted because the cash flow occurs before or after the reporting date An example: Bazinga Inc 15 Bazinga Inc is a comic book store in Pasadena, California. It is owned and managed by four friends: Sheldon, Leonard, Howard, and Raj. The Trial Balance as at June 2010 for the company, before adjusting entries are made, is shown on the following slide 16 An example: Bazinga Inc, year end info When doing adjusting entries, you will need to determine what information is available at the end of the accounting period so that you can calculate the correct balances for assets and liability accounts and determine the amounts to be included as revenue and expenses. In ACCY901, this type of information will be given to you. (a) Supplies on hand at the end of the period were $8,000 (b) The useful life of shop fittings was 5 years and the residual value is $5,000. (c) A three year insurance policy was purchased on 1 July 2009. (d) The business employs one sales assistant who is paid $1,000 for a five day working week and is paid every Friday. Balance day is a Wednesday. (e) Comic books worth $3,500 were sent to a collector with an invoice on 29 June 2010. (f) The subscription revenue recorded in the unearned revenue account were for a two-year period, therefore half of this money was earned at year end 17 (a) Supplies on hand at the end of the period were $8,000 Type of adjusting entry prepayment cost paid for before consumed In the unadjusted trial balance, supplies at the beginning of the period were $12,500 Therefore, an adjusting entry is required to reduce the balance to $8,000 DateDescriptionDebitCredit a30/6Supplies expense Supplies (to reduce supplies account to $8000) (b) The useful life of shop fittings was 5 years and the residual value is $5,000. Type of adjusting entry prepayment depreciation Adjusting entry for depreciation expense Annual depreciation expense = (cost residual value)/estimated useful life Annual depreciation expense = ($15,000-$5,000)/5 years DateDescriptionDebitCredit b30/06Dep exp fittings Accum dep fittings (to record dep expense for the year) (c) A three year insurance policy was purchased on 1 July 2009. Type of adjusting entry prepayment prepaid expense Insurance policy purchased at the beginning of the current year. Valid for three years. Adjusting entry records expiration of policy over this period. DateDescriptionDebitCredit c30/06Insurance expense Prepaid insurance (to record insurance expense for the year) (d) The business employs one sales assistant who is paid $1,000 for a five day working week and is paid every Friday. Balance day is a Wednesday. Type of adjusting entry accrual unrecorded expenses Work out: how much is paid per day AND how many days fall between date of last pay and balance date. DateDescriptionDebitCredit d30/06Salary expense Salaries payable (to record salaries owed but not yet paid) (e) Comic books worth $3,500 were sent to a collector with an invoice on 29 June 2010. Type of adjusting entry accrual unrecorded revenue Adjusting entry for unrecorded revenue DateDescriptionDebitCredit e30/06 (to record revenue earned but not yet received) (f) The subscription revenue recorded in the unearned revenue account were for a two-year period, therefore half of this money was earned at year end Type of adjusting entry deferral unearned revenue Adjusting entry for unearned revenue now earned DateDescriptionDebitCredit f30/06 (to record unearned revenue earned during the year) An example: Bazinga Inc 24 Once adjusting entries are posted to ledger accounts, new totals are calculated and an adjusted trial balance is taken After the adjusting process is completed, the adjusted trial balance is used to prepare the financial statements We will use worksheets to help us with this process Using a worksheet 25 Why use a worksheet? It helps to compile the information necessary for the preparation of the financial statements The balances of ledger accounts appear in one location The affect of adjustments can be viewed easily and corrected if necessary Because the adjusted trial balance is easily visible, the worksheet can simplify the preparation of financial statements What does a worksheet look like? 26 An example: Bazinga Inc 27 Once the adjustments are entered, the adjusted balances are extended to the appropriate columns in the adjusted trial balance. Expenses debit column Revenue credit column Assets and dividends/drawings debit columns Liabilities, equity, contra assets credit columns 28 An example: Bazinga Inc 29 Finally, the amounts in the adjusted trial balance are entered in the income statement and balance sheet columns. Expenses = debit column of income statement Revenue = credit column of income statement Assets and dividends/drawings = debit column of balance sheet Liabilities, equity, contra assets = credit column of balance sheet These columns are then used to prepare the financial statements 30 Income statement from worksheet 31 Statement of changes in equity 32 Retained earnings, beginning21,500 Add: net profit24,150 45,650 Less: dividends - Retained earnings, 30 June 201045,650 Bazinga Inc Statement of Changes in Equity for the year ended 30 June 2010 Balance sheet from worksheet 33 Chapter 4: Completion of the accounting cycle Week 3 34 Closing entries To make the accounts ready for the next accounting period, the books must be closed. Understand the difference between Temporary (or nominal) accounts Permanent (or real) accounts Temporary accounts include all the income statement accounts and dividend/drawing accounts that are useful for one period only (to determine profit for the year). These accounts are closed at the end of the year. Permanent accounts include all balance sheet accounts and relate to one or more accounting periods. These accounts are not closed. 35 Preparing closing entries Closing entries Formally transfer profit or loss and owners drawings or dividends to owners capital Produce a zero balance in each temporary account Profit and Loss Summary This is another temporary account which is used to help with the closing process This account is also closed (example coming!) 36 The closing process 1 Close revenue accounts to Profit and Loss Summary 2 Close expenses accounts to Profit and Loss Summary 37 (Individual) Revenue Profit and Loss Summary (Individual) Expenses 12 The closing process continued 3 Close Profit & Loss Summary to Retained earnings 38 Profit and Loss Summary Retained earnings 3 The closing process continued 4 Close Dividends to Retained earnings 39 Retained earnings Dividends 4 Closing Entries Illustrated: Bazinga Inc 40 GENERAL JOURNAL J3 Date Account titles and explanations Ref. Debit Credit 2010 June 30 Sales Revenue 32 250 Profit & Loss Summary 32 250 (To close income account) 30 Profit & Loss Summary 8 100 Supplies Expense 4 500 Depreciation Expense - fittings 2 000 Insurance Expense 1 000 Salaries Expense 600 (To close expense accounts) 30 Profit & Loss Summary 24 150 Retained earnings 24 150 (To close Profit and Loss Summary account and transfer profit to Retained Earnings) IF THERE HAD BEEN A DIVIDEND PAID 30 Retained earnings 500 Dividends 500 (To close dividends and recognise decrease in retained earnings) 1 2 3 4