© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-1 THE ACCOUNTING CYCLE: ภาคจบ Chapter 5

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-2 At the end of the period, we need to make adjusting entries to get the accounts up to date for the financial statements.

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-3 Adjusting entries are needed whenever revenue or expenses affect more than one accounting period. Every adjusting entry involves a change in either a revenue or expense and an asset or liability. Adjusting Entries

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-4 Types of Adjusting Entries 1. Accruing uncollected revenues: รายได้รับ ล่วงหน้า 2.Accruing unpaid expenses: ค่าใช้จ่ายค้าง จ่าย 6.Depreciation: ค่าเสื่อมราคา 3.Converting liabilities to revenue: รายได้รับล่วงหน้า 4.Converting assets to expenses: ค่าใช้จ่ายจ่าย ล่วงหน้า 5.Doubtful account: หนี้ สงสัยจะสูญ

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-5 Prior PeriodsCurrent PeriodFuture Periods Transaction Receivable will be collected. Transaction Receivable will be collected. End of Current Period Adjusting Entry  Recognizes revenue earned but not yet recorded, and  Records receivable. Adjusting Entry  Recognizes revenue earned but not yet recorded, and  Records receivable. 1.Accruing Uncollected Revenue

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-6 Examples Include: Interest Earned Work Completed But Not Yet Billed to Customer 1.Accruing Uncollected Revenue

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-7 Saturday, Jan. 15 Tuesday, Feb. 15 $170 Interest Revenue On Jan. 31, the bank owes Webb Co. interest of $170. Interest is paid on the 15 th day of each month. Monday, Jan Accruing Uncollected Revenue

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-8 Initially, the revenue is recognized and a receivable is created. 1.Accruing Uncollected Revenue

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-9 Income Statement Revenue earned this period. Income Statement Revenue earned this period. Balance Sheet Receivable to be collected in a future period. Balance Sheet Receivable to be collected in a future period. 1.Accruing Uncollected Revenue

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-10 Saturday, Jan. 15 Tuesday, Feb. 15 $320 Monthly Interest $170 Interest Revenue Let’s look at the entry for February 15. Monday, Jan. 31 $150 Interest Revenue 1.Accruing Uncollected Revenue

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-11 The receivable is collected in a future period. 1.Accruing Uncollected Revenue

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-12 Prior PeriodsCurrent PeriodFuture Periods Transaction Liability will be paid. Transaction Liability will be paid. End of Current Period Adjusting Entry  Recognizes expenses incurred, and  Records liability for future payment. Adjusting Entry  Recognizes expenses incurred, and  Records liability for future payment. 2.Accruing Unpaid Expenses

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-13 Examples Include: Interest Wages and Salaries Property Taxes Hey, when do we get paid? 2.Accruing Unpaid Expenses

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-14 Monday, May 29 Friday, June 2 $3,000 Wages Expense On May 31, Webb Co. owes wages of $3,000. Pay day is Friday, June 2. Wednesday, May 31 2.Accruing Unpaid Expenses

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-15 Initially, an expense and a liability are recorded. 2.Accruing Unpaid Expenses

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-16 Income Statement Cost incurred this period to generate revenue. Income Statement Cost incurred this period to generate revenue. Balance Sheet Liability to be paid in a future period. Balance Sheet Liability to be paid in a future period. 2.Accruing Unpaid Expenses

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-17 Monday, May 29 Friday, June 2 $5,000 Weekly Wages Let’s look at the entry for June 2. Wednesday, May 31 $2,000 Wages Expense $3,000 Wages Expense 2.Accruing Unpaid Expenses

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-18 The liability is extinguished when the debt is paid. 2.Accruing Unpaid Expenses

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-19 Prior PeriodsCurrent PeriodFuture Periods Transaction Collected from customers in advance (creates a liability). Transaction Collected from customers in advance (creates a liability). End of Current Period Adjusting Entry  Recognizes portion earned as revenue, and  Reduces balance of liability account. Adjusting Entry  Recognizes portion earned as revenue, and  Reduces balance of liability account. 3.Converting Liabilities to Revenue

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-20 Examples Include: Airline Ticket Sales Sports Teams’ Sales of Season Tickets 3.Converting Liabilities to Revenue

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-21 Jan. 1Dec. 31 $6,000 Rental Contract Coverage for 12 Months $500 Monthly Rental Revenue On January 1, Webb Co. received $6,000 in advance for a one-year rental contract. 3.Converting Liabilities to Revenue

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-22 Initially, revenues that benefit more than one accounting period are recorded as liabilities. 3.Converting Liabilities to Revenue

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-23 Over time, the revenue is recognized as it is earned. 3.Converting Liabilities to Revenue

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-24 Income Statement Revenue earned this period. Income Statement Revenue earned this period. Balance Sheet Liability for future periods. Balance Sheet Liability for future periods. 3.Converting Liabilities to Revenue

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-25 Prior PeriodsCurrent PeriodFuture Periods Transaction Paid future expenses in advance (creates an asset). Transaction Paid future expenses in advance (creates an asset). End of Current Period Adjusting Entry ¶ Recognizes portion of asset consumed as expense, and · Reduces balance of asset account. Adjusting Entry ¶ Recognizes portion of asset consumed as expense, and · Reduces balance of asset account. 4.Converting Assets to Expenses

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-26 Examples Include: Supplies Expiring Insurance Policies 4.Converting Assets to Expenses

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-27 Jan. 1Dec. 31 $2,400 Insurance Policy Coverage for 12 Months $200 Monthly Insurance Expense On January 1, Webb Co. purchased a one- year insurance policy for $2, Converting Assets to Expenses

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-28 Initially, costs that benefit more than one accounting period are recorded as assets. 4.Converting Assets to Expenses

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-29 The costs are expensed as they are used to generate revenue. 4.Converting Assets to Expenses

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-30 Income Statement Cost of assets used this period to generate revenue. Income Statement Cost of assets used this period to generate revenue. Balance Sheet Cost of assets that benefit future periods. Balance Sheet Cost of assets that benefit future periods. 4.Converting Assets to Expenses

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide Doubtful Account Uncollectible/Doubtful Accounts : If a company makes credit sales to customers, some accounts inevitably will turn out to be uncollectible.

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide Doubtful Account At the end of each period, record an estimate of the uncollectible accounts. Contra-asset account Selling expense

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide Doubtful Account The net realizable value is the amount of accounts receivable that the business expects to collect.

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-34 Depreciation is the systematic allocation of the cost of a depreciable asset to expense. Depreciable assets are physical objects that retain their size and shape but lose their economic usefulness over time. 6.The Concept of Depreciation

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-35 The portion of an asset’s utility that is used up must be expensed in the period used. Cash (credit) Fixed Asset (debit) On date when initial payment is made... The asset’s usefulness is partially consumed during the period. At end of period... Accumulated Depreciation (credit) Depreciation Expense (debit) 6.The Concept of Depreciation

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-36 On May 2, 2003, JJ’s Lawn Care Service purchased a lawn mower with a useful life of 50 months for $2,500 cash. Using the straight-line method, calculate the monthly depreciation expense. $2, = $50 Depreciation expense (per period) = Cost of the asset Estimated useful life 6.Depreciation Is Only an Estimate

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-37 JJ’s Lawn Care Service would make the following adjusting entry. Contra-asset 6.Depreciation Is Only an Estimate

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-38 JJ’s $15,000 truck is depreciated over 60 months as follows: $15,000  60 months = $250 per month 6.Depreciation Is Only an Estimate

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-39 Accumulated depreciation would appear on the balance sheet as follows:

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-40 As a corporation earns taxable income, it incurs income taxes expense, and also a liability to governmental tax authorities. Accruing Income Taxes Expense: The Final Adjusting Entry

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-41 Costs are matched with revenue in two ways:  Direct association of costs with specific revenue transactions.  Systematic allocation of costs over the useful life of the expenditure. Adjusting Entries and Accounting Principles

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-42 Journalize transactions. Post entries to the ledger accounts. Prepare trial balance. Make end-of- year adjustments. Prepare adjusted trial balance. Recall from the accounting cycle discussed in Chapter 4, that after the adjusting entries are made, an adjusted trial balance is prepared. Effects of the Adjusting Entries

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-43 Reporting Financial Results

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-44 This is the Adjusted Trial Balance for JJ’s. Now, let’s prepare the financial statements for JJ’s Lawn Care Service for May.

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-45 Net income also appears on the Statement of Owner’s Equity.

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-46 Business Earnings Dividends Business Losses Summarizes the increases and decreases in Retained Earnings during the period. Retained Earnings

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-47 Now, let’s prepare the Balance Sheet.

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-48 Many companies group together as separate balance sheet subtotals those assets and liabilities that are considered current.

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-49 Next, let’s prepare the Statement of Cash Flows for JJ’s Lawn Care Service for May.

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-50

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-51 Notes to the Financial Statements Examples of Items Disclosed  Lawsuits pending  Scheduled plant closings  Governmental investigations  Significant events occurring after the balance sheet date  Specific customers that account for a large portion of revenue  Unusual transactions and related party transactions Examples of Items Disclosed  Lawsuits pending  Scheduled plant closings  Governmental investigations  Significant events occurring after the balance sheet date  Specific customers that account for a large portion of revenue  Unusual transactions and related party transactions Drafting Notes to the Financial Statements

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-52 Closing the Temporary Equity Accounts  Close Revenue accounts to Income Summary.  Close Expense accounts to Income Summary.  Close Income Summary account to Retained Earnings.  Close Dividends to Retained Earnings. The closing process gets the temporary accounts ready for the next accounting period.

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-53 Since Sales Revenue has a credit balance, the closing entry requires a debit to the Sales Revenue account. Closing Entries for Revenue Accounts

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-54 Closing Entries for Revenue Accounts

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-55 Since expense accounts have a debit balance, the closing entry requires a credit to the expense accounts. Closing Entries for Expense Accounts

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-56 Closing Entries for Expense Accounts Net Income

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-57 Since Income Summary has a $400 credit balance, the closing entry requires a debit to Income Summary. Closing the Income Summary Account

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-58 The balance in Income Summary is now zero. Closing the Income Summary Account

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-59 Since the Dividends account has a debit balance, the closing entry requires a credit to the Dividends account. Closing the Dividends Account

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-60 Closing the Dividends Account

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-61 After all closing entries are made, JJ’s After-Closing Trial Balance looks like this.

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-62 Monthly Quarterly Jan. 1Dec. 31 Annually Many companies prepare financial statements at various points throughout the year. Interim Financial Statements Preparing Financial Statements Covering Different Periods of Time

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-63 Openning Entries  เมื่อเริ่มต้นงวดบัญชีใหม่ ให้บันทึก รายการเปิดบัญชีในสมุดรายวัน ทั่วไปเล่มใหม่ด้วยจำนวนยอด คงเหลือในรายการสินทรัพย์ หนี้สิน และส่วนของผู้เป็นเจ้าของแล้วผ่าน รายการไปบัญชีแยกประเภทที่ เกี่ยวข้องในสมุดบัญชีแยกประเภท ทั่วไปเล่มใหม่เป็นยอดคงเหลือยก มา

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-64 ภาคผนวกบทที่ 5 การกลับรายการ (Reversing Entries)  คือการกลับรายการปรับปรุงที่ได้บันทึกไว้เมื่อสิ้น งวดก่อน เสมือนไม่มีรายการนั้นๆเกิดขึ้น เพื่อให้ การบันทึกบันชีในงวดใหม่สะดวกขึ้นเพราะไม่ต้อง คำนึงถึงยอดในบัญชีที่ถูกปรับปรุงมาก่อน  การกลับรายการปรับปรุงจะทำเฉพาะที่เกี่ยวกับ รายได้และค่าใช้จ่าย ยกเว้นรายการปรับปรุงหนี้ สงสัยจะสูญและค่าเสื่อมราคา  กิจการจะกลับรายการปรับปรุงตอนต้นงวดหรือไม่ ก็ได้ แต่หากไม่มีการกลับรายการปรับปรุง การ บันทึกบัญชีในระหว่างงวดต้องคำนึงถึงยอด รายการที่เคยปรับปรุงมาด้วย

© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 4-65 Working Paper  กระดาษทำการเป็นเครื่องมือช่วยนัก บัญชีในการจัดทำงบการเงินให้ รวดเร็วขึ้นและไม่ผิดพลาด  กระดาษทำการอาจมีจำนวน 8 ช่อง 10 ช่อง แล้วแต่ความต้องการ