Term
| Types of Adjusting Entries |
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Definition
ALL are non-cash
Deferrals - in advance
Accruals - due (by end of year)
Depreciation
Office Supplies |
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Term
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Definition
Prepaid Expenses - asset - expenses paid in cash and recorded as assets before they are used
Unearned Revenue - liability - revenues recorded in cash and recorded as liabilities before they are earned |
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Term
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Definition
payment of cash that is recorded as an asset because service or benefit will be received in the future
Cash Payment BEFORE Expense Recorded
-insurance, supplies, advertising, rent, maintenance on equipment, fixed assets (depreciation) |
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Term
| Prepaid Expense Adjusting Entry |
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Definition
Dr. _______ Expense (Income Statement)
Cr. Prepaid _______ (Balance Sheet - asset) |
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Term
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Definition
Receipt of cash that is recorded as a liability becasue the revenue has not been earned
Cash Receipt BEFORE Revenue Recorded
-rent, airline tickets, school tuition, magazine subscriptions, customer deposits |
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Term
| Unearned Revenue Adjusting Entry |
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Definition
Dr. Unearned Revenue (Balance Sheet - liability)
Cr. Revenue (Income Statement) |
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Term
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Definition
Accrued Expenses - liability - expenses incurred but not yet paid in cash or recorded
Accrued Revenues - asset - revenues earned but not yet received in cash or recorded |
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Term
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Definition
Expenses incurred but not yet paid in cash or recorded - Liability
Expense Recorded BEFORE Cash Payment
-salaries, interest, taxes, utilities |
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Term
| Accrued Expense Adjusting Entry |
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Definition
Dr. _______ Expense (Income Statement)
Cr. _______ Payable (Balance Sheet - liablity) |
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Term
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Definition
Revenues earned but not yet received in cash or recorded - Asset
Revenue Recorded BEFORE Cash Receipt
-services performed, interest, commission |
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Term
| Accrued Revenue Adjusting Entry |
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Definition
Dr. _______ Receivable (Balance Sheet - asset)
Cr. _______ Revenue (Income Statement) |
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Term
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Definition
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Term
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Definition
Contra Asset Account (negative -)
Appears just after account it offsets on balance sheet |
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Term
| Depreciation Adjusting Entry |
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Definition
Dr. Depreciation Expense (Income Statement)
Cr. Accumulated Depreciation (Balance Sheet - Contra Asset, must be negative) |
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Term
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Definition
Stationary Items which are usually purchased & consumed during one year
When they are PURCHASED - current asset
When they are CONSUMED - expense
Used Supplies = Beginning Balance - Unused Supplies on Hand |
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Term
| Office Supplies Adjusting Entry |
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Definition
Dr. Supplies Expense (Income Statement)
Cr. Office Supplies (Balance Sheet - current asset) |
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Term
| Steps in Preparing a Worksheet |
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Definition
After account name, in column 1:
-Prepare a trial balance on the worksheet
Column 2:
-Enter adjustment data
Column 3:
-Enter adjusted balances
Column 4:
-Make income statement (revenue & expenses)
-See net income/loss
Column 5:
-Make balance sheet (assets, liabilities, owner's equity, net income/loss |
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Term
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Definition
Purpose: to prove the equality of the permanent account balances after journalizing & posting of closing entries
-All temporary accounts will have zero balances |
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Term
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Definition
All revenue accounts
All expense accounts
Owner's Drawing account
-these accounts will be CLOSED |
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Term
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Definition
All asset accounts
All liability accounts
Owner's Capital account
-these accounts WILL NOT be closed |
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Term
| Closing the Accounts - Steps |
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Definition
1. Close Revenues to Income Summary
2. Close Expenses to Income Summary
3. Close Income Summary to Owner's Capital
4. Close Owner's Drawing to Owner's Capital |
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Term
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Definition
Dr. Revenue
Cr. Income Summary |
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Term
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Definition
Dr. Income Summary
Cr. Salary Expense
Supplies Expense
Misc. Expense |
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Term
| Step 3 - Close Income Summary |
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Definition
Dr. Income Summary
Cr. Owner's Capital |
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Term
| Step 4 - Close Owner's Drawing |
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Definition
Dr. Owner's Capital
Cr. Owner's Drawing |
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