Adjusting Entries – Part III Accruals

Made to record: Revenues earned and OR Expenses incurred in the current accounting period that have not been recognized through daily entries. Adjusting Entries for Accruals SO 6 Prepare adjusting entries for accruals.

Revenues earned but not yet received in cash or recorded. Adjusting Entries for “Accrued Revenues” rentinterest services performed BEFORE Accrued revenues often occur in regard to: Cash Receipt Revenue Recorded Adjusting entry results in: SO 6 Prepare adjusting entries for accruals.

Accrued Revenues An adjusting entry serves two purposes: (1) It shows the receivable that exists, and (2) It records the revenues earned. Adjusting Entries for “Accrued Revenues” SO 6 Prepare adjusting entries for accruals.

Adjusting entries for accrued revenues Increases (debits) an asset account and Increases (credits) a revenue account. SO 6 Prepare adjusting entries for accruals. Adjusting Entries for “Accrued Revenues” Illustration 3-13

Illustration: In October Pioneer Advertising Agency earned $200 for advertising services that had not been recorded. Service Revenue200 Accounts Receivable200Oct. 31 Illustration 3-14 SO 6 Prepare adjusting entries for accruals. Adjusting Entries for “Accrued Revenues”

Summary Illustration 3-15 Adjusting Entries for “Accrued Revenues” SO 6 Prepare adjusting entries for accruals.

Expenses incurred but not yet paid in cash or recorded. Adjusting Entries for “Accrued Expenses” rentinterest BEFORE Accrued expenses often occur in regard to: Cash Payment Expense Recorded taxessalaries Adjusting entry results in: SO 6 Prepare adjusting entries for accruals.

Accrued Expenses An adjusting entry serves two purposes: (1) It records the obligations, and (2) It recognizes the expenses. Adjusting Entries for “Accrued Expenses” SO 6 Prepare adjusting entries for accruals.

Adjusting entries for accrued expenses Increases (debits) an expense account and Increases (credits) a liability account. SO 6 Prepare adjusting entries for accruals. Adjusting Entries for “Accrued Expenses” Illustration 3-16

SO 6 Prepare adjusting entries for accruals. Illustration: Pioneer Advertising Agency signed a three-month note payable in the amount of $5,000 on October 1. The note requires Pioneer to pay interest at an annual rate of 12%. Interest payable50 Interest expense50Oct. 31 Illustration 3-18 Illustration 3-17 Adjusting Entries for “Accrued Expenses”

SO 6 Prepare adjusting entries for accruals. Illustration: Pioneer Advertising Agency last paid salaries on October 26; the next payment of salaries will not occur until November 9. The employees receive total salaries of $2,000 for a five-day work week, or $400 per day. Thus, accrued salaries at October 31 are $1,200 ($400 x 3 days). Salaries payable1,200 Salaries expense1,200Oct. 31 Illustration 3-20 Adjusting Entries for “Accrued Expenses”

Summary Illustration 3-21 SO 6 Prepare adjusting entries for accruals. Adjusting Entries for “Accrued Expenses”