住所(经营场所)

Accounting Principles, 6e Weygandt, Kieso, & Kimmel,After studying this chapter, you should be able to:,CHAPTER 3 ADJUSTING THE ACCOUNTS,1 Explain the time period assumption.2 Explain the accrual basis of accounting.3 Explain why adjusting entries are needed.4 Identify the major types of adjusting entries.5 Prepare adjusting entries for prepayments.6 Prepare adjusting entries for accruals.7 Describe the nature and purpose of an adjusted trial balance.,PREVIEW OF CHAPTER 3,Timing Issues,Time period assumptionFiscal and calendar yearsAccrual vs. cash basis accountingRecognizing revenues and expenses,PREVIEW OF CHAPTER 3,STUDY OBJECTIVE 1,Explain the time period assumption.,TIME-PERIOD ASSUMPTION,The time period (or periodicity) assumption assumes that the economic life of a business can be divided into artificial time periods.Accounting time periods are generally a month, a quarter, or a year.The accounting time period of one year in length is referred to as a fiscal year.,STUDY OBJECTIVE 2,Explain the accrual basis of accounting.,ACCRUAL BASIS OF ACCOUNTING,The revenue recognition and matching principles are used under the accrual basis of accounting.Under cash basis accounting, revenue is recorded when cash is received, and expenses are recorded when cash is paid.Generally accepted accounting principles require accrual basis accounting because the cash basis often causes misleading financial statements.,REVENUE RECOGNITION PRINCIPLE,The revenue recognition principle dictates that revenue be recognized in the accounting period in which it is earned.In a service business, revenue is considered to be earned at the time the service is performed.,THE MATCHING PRINCIPLE,The practice of expense recognition is referred to as the matching principle.The matching principle dictates that efforts (expenses) be matched with accomplishments (revenues).,Revenues earnedthis month,are offset against.,expensesincurred inearning therevenue,ILLUSTRATION 3-1 GAAP RELATIONSHIPS IN REVENUE AND EXPENSE RECOGNITION,STUDY OBJECTIVE 3,Explain why adjusting entries are needed.,ADJUSTING ENTRIES,Adjusting entries are made in order for:1 Revenues to be recorded in the period in which they are earned, and for. 2 Expenses to be recognized in the period in which they are incurred.,STUDY OBJECTIVE 4,Identify the major types of adjusting entries.,Adjusting entries are required each time financial statements are prepared.Adjusting entries can be classified as1 prepayments (prepaid expenses or unearned revenues) OR2 accruals (accrued revenues or accrued expenses),ADJUSTING ENTRIES,TYPES OF ADJUSTING ENTRIES,Prepayments1 Prepaid Expenses Expenses paid in cash and recorded as assets before they are used or consumed2 Unearned Revenues cash received and recorded as liabilities before revenue is earned,TYPES OF ADJUSTING ENTRIES,Accruals1 Accrued Revenues Revenues earned but not yet received in cash or recorded2 Accrued Expenses Expenses incurred but not yet paid in cash or recorded,ILLUSTRATION 3-3 TRIAL BALANCE,The Trial Balance is the starting place for adjusting entries.,STUDY OBJECTIVE 5,Prepare adjusting entries for prepayments.,PREPAYMENTS,Prepayments are either prepaid expenses or unearned revenues.Adjusting entries for prepayments are required to record the portion of the prepayment that represents1 the expense incurred or2 the revenue earned in the current accounting period.,ILLUSTRATION 3-4 ADJUSTING ENTRIES FOR PREPAYMENTS,Prepaid expenses are expenses paid in cash and recorded as assets before they are used or consumed.Prepaid expenses expire with the passage of time or through use and consumption.An asset-expense account relationship exists with prepaid expenses.,PREPAID EXPENSES,Prior to adjustment, assets are overstated and expenses are understated.The adjusting entry results in a debit to an expense account and a credit to an asset account.Examples of prepaid expenses include supplies, insurance, and depreciation.,PREPAID EXPENSES,JOURNAL ENTRY,POSTING,ADJUSTMENT,October 31, an inventory count reveals that $1,000 of $2,500 of supplies are still on hand.,ADJUSTING ENTRIES FOR PREPAYMENTS SUPPLIES,ADJUSTING ENTRIES FOR PREPAYMENTS INSURANCE,JOURNAL ENTRY,POSTING,ADJUSTMENT,October 31, an analysis of the policy reveals that $50 of insurance expires each month.,Depreciation is the allocation of the cost of an asset to expense over its useful life in a rational and systematic manner.The purchase of equipment or a building is viewed as a long-term prepayment of services and, therefore, is allocated in the same manner as other prepaid expenses.,DEPRECIATION,DEPRECIATION,Depreciation is an estimate rather than a factual measurement of the cost that has expired.In recording depreciation, Depreciation Expense is debited and a contra asset account, Accumulated Depreciation, is credited,In the balance sheet, Accumulated Depreciation is offset against the asset account. The difference between the cost of any depreciable asset and its related accumulated depreciation is referred to as the book value of the asset.,DEPRECIATION,ADJUSTING ENTRIES FOR PREPAYMENTS DEPRECIATION,JOURNAL ENTRY,POSTING,ADJUSTMENT,October 31, depreciation on the office equipment is estimated to be $480 a year, or $40 per month.,Unearned revenues are revenues received and recorded as liabilities before they are earned.Unearned revenues are subsequently earned by rendering a service to a customer.A liability-revenue account relationship exists with unearned revenues.,UNEARNED REVENUES,Prior to adjustment, liabilities are overstated and revenues are understated.The adjusting entry results in a debit to a liability account and a credit to a revenue account.Examples of unearned revenues include rent, magazine subscriptions, and customer deposits for future services.,UNEARNED REVENUES,ADJUSTING ENTRIES FOR PREPAYMENTS UNEARNED REVENUES,JOURNAL ENTRY,POSTING,ADJUSTMENT,October 31, analysis reveals that, of $1,200 in fees, $400 has been earned in October.,STUDY OBJECTIVE 6,Prepare adjusting entries for accruals.,ACCRUALS,The second category of adjusting entries is accruals.Adjusting entries for accruals are required to record revenues earned and expenses incurred in the current period.The adjusting entry for accruals will increase both a balance sheet and an income statement account.,ILLUSTRATION 3-10 ADJUSTING ENTRIES FOR ACCRUALS,Accrued revenues may accumulate with the passing of time or through services performed but not billed or collected.An asset-revenue account relationship exists with accrued revenues.Prior to adjustment, assets and revenues are understated.The adjusting entry requires a debit to an asset account and a credit to a revenue account.,ACCRUED REVENUES,ADJUSTING ENTRIES FOR ACCRUALS ACCRUED REVENUES,October 31, the agency earned $200 for advertising services that were not billed to clients before October 31.,JOURNAL ENTRY,POSTING,ADJUSTMENT,Accrued expenses are expenses incurred but not paid yet.A liability-expense account relationship existsPrior to adjustment, liabilities and expenses are understatedThe Adjusting Entry results in a debit to an expense account and a credit to a liability account,ACCRUED EXPENSES,ADJUSTING ENTRIES FOR ACCRUALS ACCRUED INTEREST,JOURNAL ENTRY,POSTING,ADJUSTMENT,October 31, the portion of the interest to be accrued on a 3-month note payable is calculated to be $50.,ADJUSTING ENTRIES FOR ACCRUALS ACCRUED SALARIES,JOURNAL ENTRY,POSTING,ADJUSTMENT,October 31, accrued salaries are calculated to be $1,200.,ILLUSTRATION 3-16 SUMMARY OF ADJUSTING ENTRIES,1 Prepaid Assets and Assets overstated Dr. Expenses expenses expenses Expenses understated Cr. Assets2 Unearned Liabilities and Liabilities overstated Dr. Liabilities revenues revenues Revenues understated Cr. Revenues3 Accrued Assets and Assets understated Dr. Assets revenues revenues Revenues understated Cr. Revenues4 Accrued Expenses and Expenses understated Dr. Expenses expenses liabilities Liabilities understated Cr. Liabilities,STUDY OBJECTIVE 7,Describe the nature and purpose of an adjusted trial balance.,ADJUSTED TRIAL BALANCE,An Adjusted Trial Balance is prepared after all adjusting entries have been journalized and posted.Its purpose is to prove the equality of the total debit and credit balances in the ledger after all adjustments have been made.Financial statements can be prepared directly from the adjusted trial balance.,ILLUSTRATION 3-19 TRIAL BALANCE AND ADJUSTED TRIAL BALANCE COMPARED,PREPARING FINANCIAL STATEMENTS,Financial statements can be prepared directly from the adjusted trial balance.1 The income statement is prepared from the revenue and expense accounts.2 The owners equity statement is derived from the owners capital and drawing accounts and the net income (or net loss) from the income statement.3 The balance sheet is then prepared from the asset and liability accounts and the ending owners capital balance as reported in the owners equity statement.,ILLUSTRATION 3-20 PREPARATION OF THE INCOME STATEMENT AND THE OWNERS EQUITY STATEMENT FROM THE ADJUSTED TRIAL BALANCE,ILLUSTRATION 3-20 PREPARATION OF THE INCOME STATEMENT AND THE OWNERS EQUITY STATEMENT FROM THE ADJUSTED TRIAL BALANCE,The income statement is prepared from the revenue and expense accounts.,ILLUSTRATION 3-20 PREPARATION OF THE INCOME STATEMENT AND THE OWNERS EQUITY STATEMENT FROM THE ADJUSTED TRIAL BALANCE,ILLUSTRATION 3-20 PREPARATION OF THE INCOME STATEMENT AND THE OWNERS EQUITY STATEMENT FROM THE ADJUSTED TRIAL BALANCE,The owners equity statement is prepared from the owners capital and drawing accounts and the net income (or net loss) shown in the income statement.,ILLUSTRATION 3-21 PREPARATION OF THE BALANCE SHEET FROM THE ADJUSTED TRIAL BALANCE,ILLUSTRATION 3-21 PREPARATION OF THE BALANCE SHEET FROM THE ADJUSTED TRIAL BALANCE,The balance sheet is then prepared from the asset and liability accounts and the ending owners capital balance as reported in the owners equity statement.,STUDY OBJECTIVE 8,Prepare adjusting entries for the alternative treatment of prepayments.,ALTERNATIVE TREATMENTOF PREPAID EXPENSES AND UNEARNED REVENUES,Some businesses use an alternative treatment for prepaids and unearned revenues.Instead of debiting an asset at the time an expense is prepaid, the amount is charged to an expense account.Instead of crediting a liability at the time cash is received in advance of earning it, the amount is credited to a revenue account.This treatment of prepaid expenses and unearned revenues will ultimately result in the same effect on the financial statements as initial entries to balance sheet accounts and then adjusting entries.,ALTERNATIVE ADJUSTMENTS FOR PREPAYMENTS SUPPLIES,JOURNAL ENTRY,POSTING,ADJUSTMENT,October 31, an inventory count reveals that $1,000 of $2,500 of supplies are still on hand.,ALTERNATIVE ADJUSTMENTS FOR PREPAYMENTS UNEARNED REVENUES,JOURNAL ENTRY,POSTING,ADJUSTMENT,October 31, analysis reveals that, of $1,200 in fees, $400 has been earned in October.,ILLUSTRATION 3A-7 SUMMARY OF BASIC RELATIONSHIPS FOR PREPAYMENTS,1 Prepaid Assets and a Prepaid expenses Assets overstatedDr Expenses Expenses