会计学原理 英文版 第21版 第三章 Adjusting Accounts and Preparing Financial Statements

1、Adjusting Accounts and Preparing Financial Statements,Chapter 3,The Accounting Period,C 1,Accounting,Accrual Basis versus Cash Basis,Accrual Basis Revenues are recognized when earned and expenses are recognized when incurred.,Cash Basis Revenues are recognized when cash is received and expenses are

2、recorded when cash is paid.,C 2,Cash Basis Revenues are recognized when cash is received and expenses are recorded when cash is paid.,Accounting,Accrual Basis versus Cash Basis,C 2,Accrual Basis Revenues are recognized when earned and expenses are recognized when incurred.,Accrual Basis versus Cash

3、Basis,On December 1, 2013, FastForward paid $2,400 cash for a twenty-four month business insurance policy. Using the cash basis, the entire $2,400 would be recognized as insurance expense in 2013. No insurance expense from this policy would be recognized in 2014 or 2015, periods covered by the polic

4、y.,C 2,Accrual Basis versus Cash Basis,On the accrual basis, $100 of insurance expense is recognized in 2013, $1,200 in 2014, and $1,100 in 2015. The expense is matched with the periods benefited by the insurance coverage.,C 2,We have delivered the product to our customer, so I think we should recor

5、d the revenue earned.,Recognizing Revenues and Expenses,C 2,The revenue recognition principle states that we recognize revenue when the product or service is delivered to our customer.,Recognizing Revenues and Expenses,The expense recognition (or matching) principle aims to record expenses in the sa

6、me accounting period as the revenues that are earned as a result of those expenses. This matching of expenses with the revenue benefits is a major part of the adjusting process.,Now that we have recognized the revenue, lets see what expenses we incurred to generate that revenue.,C 2,An adjusting ent

7、ry is recorded to bring an asset or liability account balance to its proper amount.,Framework for Adjustments,C 3,Here is the check for my 24-monthinsurance policy.,Prepaid (Deferred) Expenses,Resources paid for prior to receiving the actual benefits.,P 1,Prepaid Insurance,(a) On 12/1/13, FastForwar

8、d paid $2,400 for insurance for 2-years (24-months, December 2013 through November 2015). FastForward recorded the expenditure as Prepaid Insurance on 12/1/13. What adjustment is required?,P 1,Supplies,(b) During 2013, FastForward purchased $9,720 of supplies. FastForward recorded the expenditures i

9、n the asset account, “Supplies.” On December 31, 2013, a count of the supplies indicated $8,670 on hand, so $1,050 of supplies were used during December. What adjustment is required?,P 1,Other Prepaid Expenses,Other prepaid expenses, such as Prepaid Rent, are accounted for exactly as Insurance and S

10、upplies. We should note that some prepaid expenses are both paid for and fully used up within a single period. For example, a company may pay monthly rent on the first day of each month. This payment creates a prepaid expense on the first day of the month that fully expires by the end of the month.

11、In these special cases, we can record the cash paid with a debit to the expense account instead of an asset account.,P 1,Depreciation,Depreciation is the process of allocating the cost of a plant asset over its useful life in a systematic and rational manner.,P 1,Depreciation,On December 1, 2013, Fa

12、stForward purchased equipment for $26,000 cash. The equipment has an estimated useful life of four years (48 months) and FastForward expects to sell the equipment at the end of its life for $8,000 cash. (c) Lets record depreciation expense for the month ended December 31, 2013.,P 1,Equipment,Depreci

13、ation Expense,12/1 26,000,12/31 375,Accumulated Depreciation,12/31 375,Depreciation,P 1,Contra asset account,Equipment is shown net of accumulated depreciation.,$,Depreciation,P 1,Unearned (Deferred)Revenues,We will apply this cash you gave us towardsyour total consulting fees.,Cash received in adva

14、nce of providing products or services.,P 1,Unearned (Deferred)Revenues,On December 26, 2013, FastForward agrees to provide consulting services to a client for a fixed fee of $3,000 for 60 days. On this date, the client pays the entire consulting fee in advance. FastForward makes the following entry:

15、,P 1,Unearned (Deferred)Revenues,(d) On December 31, FastForward earns 5-days of consulting fees. Each day that passes results in consulting fees of $50 ($3,000 60), so FastForward earned ($50 5 days) $250.,P 1,Were about one-half done with this job and want to be paid forour work!,Costs incurred in

16、 a period that are both unpaid and unrecorded.,Accrued Expenses,P 1,FastForwards employee earns $70 per day and is paid every two weeks on Friday. Year-end, 12/31/13, falls on a Wednesday. The last payday of 2013 is Friday, 12/26/13. From 12/26 until year-end is three working days. The employee has

17、earned $210 for Monday through Wednesday. He will not be paid until Friday 1/9/14.,Accrued Salaries Expenses,P 1,(e) FastForwards employee has earned but not been paid on December 31, 2013, $210.,P 1,Accrued Salaries Expenses,Future Payment ofAccrued Expenses,On January 9, 2014, FastForward will pay

18、 the payroll for the two weeks from December 26, 2013 through January 9, 2014. Here is the journal entry for the payroll:,P 1,Accrued Interest Expenses,FastForward borrowed $6,000 from First National Bank on December 1, 2013. The note bears interest at the annual rate of 6% and is due to be repaid i

19、n one year. Lets accrue interest for the month ended December 31, 2013.,P 1,Yes, Ive completed yourconsulting job, but have not had time to bill you.,Accrued Revenues,Revenues earned in a period that are both unrecorded and not yet received.,P 1,Accrued Service Revenue,(f) On December 12, 2013, Fast

20、Forward agrees to render consulting services under a 30-day fixed fee contract for $2,700 ($90 per day). All services are to be completed by January 10, 2014, when the client will pay in full.,P 1,Future Receipt ofService Revenues,On January 10, 2014, FastForward completed its obligation under the c

21、onsulting contract. The client was billed $2,700 and FastForward received $2,700 in cash.,Revenue in January 10 days $90 = $900,P 1,Links to Financial Statements,A 1,P 2,Preparing Financial Statements,Lets use FastForwards adjusted trial balance to prepare the companys financial statements.,P 3,P 3,

22、1. Prepare the Income Statement,Note: Net Income from the Income Statement carries to the Statement of Changes in Owners Equity.,P 3,2. Prepare the Statement of Owners Equity,a,3. Prepare The Balance Sheet,P 3,Global View,Both U.S. GAAP and IFRS include similar guidance for adjusting accounts. Although some variations exist