ch3 the adjusting process Flashcards
accrual basis of acct
revenue is recorded when earned and expenses when incurred, regardless if cash is received or paid
revenue recognition principle
revenue recorded when earned, no when cash is receives
cash basis acct
revenue and expenses are recorded when cash is earned
matching principle
matches expenses with revenue
2 accts to adjust entry journal
balance sheet (assets,liabilities) and income statement (revenue or expense)
types of adjustment
accrual / deferral / depreciaiton (asset loses values)
accrual, adjust them
Revenue/expense not recorded but have been earned/incurred. So will cr that revenue and debit accts receivable and dr the expense and cr payable
defferal, adjust u.e. and prepaid asset
FUTURE revenue or expense initially recorded as a liability or asset (unearned revenue, prepaid asset). So to adjust u.e. would be cr. service revenue debit u.e. To adjut prepaid asset, dr expense, cr asset
accts for depreciation
depreciation expense and accumulated equipment depreciation (contra asset, so its credit instead of debit)
Equipment depreciated 280 for month (Record for 3 months of use)
In 3 months equipement has been depreciation value of 280*3=840
so debit depre expense and credit accumulated equip
“but not yet billed”
customers owe me but they dont know yet
- Dell’s Cycling purchases a 1-year insurance policy on July 1 for $3,600. The adjusting entry to record insurance used up on
December 31 (six months worth of insurance) is:
costo por mes: 3600/12=300,
costo por 6 meses: 1800
dr expense 1800
cr prepaid insurance 1800
accumulated depreciation=
contra asset acct
record supplies on hand $5, there were $8
dr supply expense $3
cr supply $3
