Principles of

Accounting
(ACC 111) – Accrual & Cash base and
Adjustments

GHIAS UL HASSAN KHAN

MBA, ACCA, AICS, MCE, MIE
PHD – IN PROGRESS

Session 7, 8 &
9
Quote of the day

It is required for the vendor to

tell the buyer of any defects of
which he is aware.
Prophet Mohammad (PBUH)

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 1. What is accrual base accounting?

Agenda 2. What is cash base accounting?

3. What do we mean by adjustments

4. Why adjustments needed

5. How to make adjusting entry

6. What is adjusted trial balance?

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Accrual vs. Cash base accounting
The difference between cash and accrual accounting lies in the timing of when sales and purchases
are recorded in your accounts.

1.Cash accounting recognizes revenue and expenses only when money changes hands

2.In Accrual accounting recognizes revenue when it's earned, and expenses when they're billed.

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Practice question - Accruals

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Practice question - Accruals

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Practice question - Accruals

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Practice question - Accruals

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Practice question - Accruals

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Practice question - Accruals

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Practice question - Accruals

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Adjustments and Adjusted Trial Balance
1. Types of adjustment
a) Fixed
b) Varies with trial balance comparative
c) Varies as separate cases

2. What is adjusted trial balance

3. Concept of 10 – column worksheet

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 Practice
question
1

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Practice question 2
The following information has not yet been
recorded:

1.Rates owing on 30 June, $4820.

2.Depreciation on the equipment is $3680. Depreciation
on the building is $9600.
3.An advance fee payment of $600 for minor surgery to
be performed in July 2016 was credited to Fees Earned.
4.The mortgage contract provides for a monthly
payment of $1000 plus accrued interest. The June
payment was not made. Interest of $260 is accrued on
the mortgage.
5.Prepaid insurance of $1340 has expired.
6.Salaries earned but not paid amount to $2360.

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Practice question 3
DEBIT BALANCES:
Following additional information is available for
adjustment:
Cash Rs.80,000; Account ReceivableRs.120,000;
Allowance for bad debts Rs.2,000; Merchandise 1.Commission earned Ra.108,000.
Inventory Rs.137,000; Prepaid Rent Rs.18,000;
2.Rent expired Rs.12,000.
Equipment Rs.2,00,000; Drawing $72,000; Cost of
Goods Sold Rs.3,60,000; Utilities expense 3.Accrued Wages Rs.18,000.
Rs.48,000; Wages expense Rs.64,000; Office
Supplies Expense Rs.30,000. 4.Depreciation was estimated at 5% on cost.

CREDIT BALANCES: 5.Allowance for bad debts 2% of A/R

Sales Rs.439,000; Commission Rs.120,000; Bond 6.Office supplies used Rs.26,000.

Payable Rs.90,000, Capital Rs.?

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 Practice question 4
The following Trial balance data have been taken from the
Data for Adjustments:
books of Tow Plc. The accounts are maintained to meet the
requirements of accounting standards and generally accepted
accounting policies. 1.Unexpired insurance on December 31, Rs.2,400
2.Supplies used Rs.2,000.
Cash Rs.133,200; Accounts Receivable Rs.196,800; 3.The buildings are being depreciated over a 25-year
Merchandise inventory (Jan. 1. 2013) Rs.248,000; Unexpired useful life. The equipment is being depreciated over a
Insurance Rs.7,200; Office supplies Rs.3,200; Building 10-year useful life (Use straight line method)
Rs.240,000; Accumulated Depreciation: Building Rs.9,600;
Equipment Rs.64,000; Accumulated Depreciation: 4.Salaries payable as of December 31, were Rs.
Equipment Rs.19,200; 20,000
5.Inventory of merchandise on Dec. 31, was Rs.
Accounts payable Rs.191,600; Tow Capital Rs.? 158,400.
Tow Drawing Rs.72,000; Sales Rs.1,304,000; sales Returns
Rs.20,800; Purchases Rs.760,000; Purchase Return Rs.8,000;
Transportation in Rs.19,200; Salaries expense Rs.161,600;
Misc. Expenses Rs.4,400.

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Thanks & continue to the next part

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