Adjusting Entries:

Prepaid Expenses
Lesson 14
Objectives
• Define what adjusting entries are.
• Enumerate the different types of adjusting entries.
• Prepare adjusting entries for prepayments using two
methods – asset method and expense method.
Adjusting Entries
• Entries made at the end of the accounting period before
closing procedures to update balances of asset, liability,
revenue, and expense accounts to make their balances ready
for the preparation of financial statements.
Kinds of Adjusting Entries
• Prepaid Expenses Asset >> Expense
• Deferred Revenue Liab >> Revenue
• Accrued Revenue Earn / Payment X
• Accrued Expenses Incur / Payment X
• Asset Depreciation
• Uncollectible Accounts
• Subsequent measurements of asset and liability accounts
Adjusting Entries adhere to:
• Completeness
• Freedom from error
• Timeliness
• Accrual basis
• Revenue Recognition
• Matching Principle
Jungkook Company purchased office supplies on August 1,
2022 amounting to P100,000 in which the company
immediately paid in cash. At December 31, 2022 which
coincides to be the end of the accounting period, inventory
records show that the amount of remaining office supplies
amount to P40,000.
Adjusting Entries:
Insurance
Lesson 15
Objectives
• Compute for the proper balances of insurance
expense and prepaid insurance.
Jimin Company purchased the following insurance policies in
2020:
Policy M 7,440.00 04/01/2020 - 3/31/2021

Policy N 12,000.00 7/30/2020 - 7/30/2022

Policy L 16,200.00 11/1/2020 - 10/31/2023

35,640.00

How much is the insurance expense and the prepaid

insurance at the end of each reporting period?
Adjusting Entries:
Deferred Revenue
Lesson 16
Objectives
• Prepare adjusting entries using two methods – liability
method and revenue method
V Consultancy received P150,000 representing advanced
payment for six (6) months tax compliance and consultancy
services from one of their clients on November 1, 2020. The
accounting period of the entity ends on December 31, 2020.
Adjusting Entries:
Accruals
Lesson 17
Objectives
• Prepare adjusting entries for accrued revenue.
• Prepare adjusting entries for accrued expenses.