Professional Documents
Culture Documents
Adjustments (Accounting)
Adjustments (Accounting)
Periodicity Concept
Division of economic life of a business into artificial time period to provide timely information as to the performance of the business
month quarter Year (most common)
Fiscal (any month that starting with January) Calendar (starts on January 1)
Adjusting Entries
General Journal
Ledger
Expired
Prepaid Rent
Corpuz records an adjustment for 1 month rent he used from the prepaid rent amounting to P21,000 she paid last Dec 1.
Transaction Expiration of one months rent Analysis Rules Entries Assets decreased. Expense increased Decrease in assets = credits Increase in expense = debits Rent expense P7,000 Prepaid Rent P7,000
Prepaid Insurance
Corpuz records the expiration of one-twelfth of the companys one-year insurance policy amounting to P24,000 taken last Dec 1. Transaction Expiration of one months insurance Analysis Rules Entries Assets decreased. Expense increased Decrease in assets = credits Increase in expense = debits Insurance expense P2,000 Prepaid Insurance P2,000
Supplies
Corpuz discovers that she used P500 worth of supplies from
Transaction Consumption of supplies Analysis Rules Entries Assets decreased. Expense increased Decrease in assets = credits Increase in expense = debits Supplies expense P500 Supplies P500
Depreciation
The estimated amount allocated for the use of longlived assets such as buildings, service vehicles, computers or office furnitures in one accounting cycle.
Depreciation Expense
Asset cost xx Less: Estimated salvage value (xx) Depreciable cost xx Divided by: Estimate useful life x Depreciation expense xx
Depreciation
Corpuz bought a truck amounting to P300,000 last Dec 1. Corpuz allocates a full months depreciation for property and equipment. It is estimated that the truck will have a useful life of five years and a salvage value of P30,000. [(P300,000 P30,000) / 60 months]
Transaction Analysis Rules Entries Recording of depreciation expense Assets decreased. Expense increased Decrease in assets = credits Increase in expense = debits Depreciation expense P4,500 Accumulated depreciation P4,500
Accrued Revenues
Neither paid by clients nor billed
During the afternoon of Dec 31, Corpuz cuts one lawn, and she agrees to mail the customers a bill for P2,500 which she does on Jan 3. Corpuz makes an adjusting entry in accordance with the revenue recognition principle.
Transaction Accrual of unrecorded revenue Analysis Asset increased, Revenue increased
Rules
Entries
Increase in asset = debits Increase in revenue = credits Accounts Receivable P2,500 Lawn Cutting Revenues P2,500