1. Introduction to Accounting Preparing for a User’s Perspective
Analyze, record & post adjusting entries.
Prepare adjusted trial balance.
Debits and Credits Trainer
By Kevin C. Kimball, CPA
with support from
Free Jan. 2014
Available on the Google Play Store
Part A

2. The Full Accounting Cycle
Original Transaction Entries
Identify
Analyze
Record
Post
Prepare
Pre-adjusted TB
Adjusting Entries
Identify
Analyze
Record
Post
Prepare
Adjusted TB
Financial Statements
Closing Entries
Identify
Analyze
Record
Post
Prepare
Post-Closing TB
Part A

3. Steps in the Accounting Cycle
1) Identify
2) Analyze
Steps in the Accounting Cycle
a) What accounts?
Round 2
b) Increase or decrease?
Adjusting Entries
c) Amount $?
d) Debit or credit?
3) Record
5) Prepare*
Date
Account
Debit
Credit
4/8
Utilities Expense
400
Accrued Expenses
Adj. Trial Balance
DR (CR)
146,590
13,000
10,000
Etc.
(3,400) $0
Cash
Accounts Receivable
Inventory
Etc.
Accrued Liabilities Etc.
Total
Util. Expense
Accrued Liab.
4) Post
3,000
400
400
* This round includes preparation of financial statements
Part A

4. April May June July Aug. Sept. Oct. Nov. Dec.
We decided to report as of and for the period ended 12/31/X1;
therefore, we continued to record transactions up until December 20X1.
April
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec.
We need to adjust our 12/31/X1 pre-adjusted trial balance because it is currently misstated.
Part A

5. The company has identified the following information to help in preparing adjusting entries:
1) $30 bank fees and $600 int. revenue not yet recorded.
2) No adjustments identified.
3) Estimate that 3% of receivables is uncollectible.
4) No adjustments identified.
5) Only $70 of office supplies remain in the closet.
6) $12,000 represents insurance from 3/1/X1 to 2/28/X2.
7) $300 of equipment depreciation needs to be recorded.
8) $6,000 of building depreciation needs to be recorded.
9) No adjustments needed.
10) See #17 below.
11) Estimate $350 of utilities used but not yet billed.
12) Interest at 5% from 3/1/X1 to 12/31/X1 to be accrued.
13) No adjustments identified.
14) No adjustments identified.
15) No adjustments identified.
16) No adjustments identified.
17) 2% commission not yet recorded on a $1,000 sale.
18) See #11 above.
19) No adjustments identified.
20) Income tax expense needs to be computed & recorded.
Part A

6. + - + - Analyze, Record & Post Adjusting Entries in 4 Easy Steps
Example: $30 bank fees not yet recorded.
A = L Eq
1. Draw T-accounts and enter the pre-adjusted account balances for each affected account.
Cash
Bank fees
150,000
Pre-adjusted 12/31/X1
2. Determine what the adjusted account balances SHOULD be. 30 30
Adjusting entry
149,970 30
Adjusted 12/31/X1
3. Determine the debits or credits that are needed to adjust the wrong, pre-adjusted balances to the right adjusted balances. + - + -
Date
Account
Debit
Credit
4. Record the adjusting entry in the General Journal & Post to Ledger.
12/31/X1 Bank fees
Cash
Part A

7. + - - + Analyze, Record & Post Adjusting Entries in 4 Easy Steps
Example: $600 of interest revenue not yet recorded.
A = L Eq
1. Draw T-accounts and enter the pre-adjusted account balances for each affected account.
Interest Revenue
Cash
149,970
Pre-adjusted 12/31/X1
2. Determine what the adjusted account balances SHOULD be.
600
600
Adjusting entry
150,570
600
Adjusted 12/31/X1
3. Determine the debits or credits that are needed to adjust the wrong, pre-adjusted balances to the right adjusted balances. + - - +
Date
Account
Debit
Credit
4. Record the adjusting entry in the General Journal & Post to Ledger.
12/31/X1 Cash
Interest Revenue
Part A

8. Allowance for Doubtful Accts
Analyze, Record & Post Adjusting Entries in 4 Easy Steps
Example: Estimate that 3% of receivables is uncollectible.
$15,000 * 3% = $450
A = L Eq
Accounts Receivable
1. Draw T-accounts and enter the pre-adjusted account balances for each affected account.
15,000
Pre-adjusted 12/31/X1 + -
Bad Debt Expense
Allowance for Doubtful Accts
2. Determine what the adjusted account balances SHOULD be.
Pre-adjusted 12/31/X1
3. Determine the debits or credits that are needed to adjust the wrong, pre-adjusted balances to the right adjusted balances.
450
Adjusting entry
450
450
450
Adjusted 12/31/X1 - + + -
Date
Account
Debit
Credit
4. Record the adjusting entry in the General Journal & Post to Ledger.
12/31/X1 Bad Debt Expense
Allowance for Doubtful Accounts
Part A

9. Office Supplies Expense
Analyze, Record & Post Adjusting Entries in 4 Easy Steps
Example: Only $70 of office supplies remains in the closet.
A = L Eq
1. Draw T-accounts and enter the pre-adjusted account balances for each affected account.
Office Supplies Expense
Office Supplies
500
Pre-adjusted 12/31/X1
2. Determine what the adjusted account balances SHOULD be.
Adjusting entry
430
430 70
430
Adjusted 12/31/X1
3. Determine the debits or credits that are needed to adjust the wrong, pre-adjusted balances to the right adjusted balances. + - + -
Date
Account
Debit
Credit
4. Record the adjusting entry in the General Journal & Post to Ledger.
12/31/X1 Office Supplies Expense
Office Supplies
Part A

10. ($12,000 / 12) * 2 months remaining = $2,000
Analyze, Record & Post Adjusting Entries in 4 Easy Steps
Example: $12,000 represents insurance from 3/1/X1 to 2/28/X2.
A = L Eq
($12,000 / 12) * 2 months remaining = $2,000
1. Draw T-accounts and enter the pre-adjusted account balances for each affected account.
($12,000 / 12) * 10 months used up = $10,000
Prepaid Insurance
Insurance Expense
12,000
Pre-adjusted 12/31/X1
2. Determine what the adjusted account balances SHOULD be.
Adjusting entry
10,000
10,000
2,000
10,000
Adjusted 12/31/X1
3. Determine the debits or credits that are needed to adjust the wrong, pre-adjusted balances to the right adjusted balances. + - + -
Date
Account
Debit
Credit
4. Record the adjusting entry in the General Journal & Post to Ledger.
12/31/X1 Insurance Expense ,000
Prepaid Insurance ,000
Part A

11. The company has identified the following information to help in preparing adjusting entries:
1) $30 bank fees and $600 int. revenue not yet recorded.
2) No adjustments identified.
3) Estimate that 3% of receivables is uncollectible.
4) No adjustments identified.
5) Only $70 of office supplies remain in the closet.
6) $12,000 represents insurance from 3/1/X1 to 2/28/X2.
7) $300 of equipment depreciation needs to be recorded.
8) $6,000 of building depreciation needs to be recorded.
9) No adjustments needed.
10) See #17 below.
11) Estimate $350 of utilities used but not yet billed.
12) Interest at 5% from 3/1/X1 to 12/31/X1 to be accrued.
13) No adjustments identified.
14) No adjustments identified.
15) No adjustments identified.
16) No adjustments identified.
17) 2% commission not yet recorded on a $1,000 sale.
18) See #11 above.
19) No adjustments identified.
20) Income tax expense needs to be computed & recorded.
Part A

12. The company has identified the following information to help in preparing adjusting entries:
1) $30 bank fees and $600 int. revenue not yet recorded.
2) No adjustments identified.
3) Estimate that 3% of receivables is uncollectible.
4) No adjustments identified.
5) Only $70 of office supplies remain in the closet.
6) $12,000 represents insurance from 3/1/X1 to 2/28/X2.
7) $300 of equipment depreciation needs to be recorded.
8) $6,000 of building depreciation needs to be recorded.
9) No adjustments needed.
10) See #17 below.
11) Estimate $350 of utilities used but not yet billed.
12) Interest at 5% from 3/1/X1 to 12/31/X1 to be accrued.
13) No adjustments identified.
14) No adjustments identified.
15) No adjustments identified.
16) No adjustments identified.
17) 2% commission not yet recorded on a $1,000 sale.
18) See #11 above.
19) No adjustments identified.
20) Income tax expense needs to be computed & recorded.
Part B

13. Accumulated Depreciation-Equip
Analyze, Record & Post Adjusting Entries in 4 Easy Steps
Example: $300 of equipment depreciation needs to be recorded.
A = L Eq
1. Draw T-accounts and enter the pre-adjusted account balances for each affected account.
Equipment
2,000
Pre-adjusted 12/31/X1 + -
Depreciation Expense
Accumulated Depreciation-Equip
2. Determine what the adjusted account balances SHOULD be.
Pre-adjusted 12/31/X1
3. Determine the debits or credits that are needed to adjust the wrong, pre-adjusted balances to the right adjusted balances.
300
300
Adjusting entry
300
Adjusted 12/31/X1
300 - + + -
Date
Account
Debit
Credit
4. Record the adjusting entry in the General Journal & Post to Ledger.
12/31/X1 Depreciation Expense
Accumulated Depreciation-Equipment
Part B

14. Accumulated Depreciation-Bldg
Analyze, Record & Post Adjusting Entries in 4 Easy Steps
Example: $6,000 of building depreciation needs to be recorded.
A = L Eq
1. Draw T-accounts and enter the pre-adjusted account balances for each affected account.
Building
200,000
Pre-adjusted 12/31/X1 + -
Depreciation Expense
Accumulated Depreciation-Bldg
2. Determine what the adjusted account balances SHOULD be.
Pre-adjusted 12/31/X1
300
3. Determine the debits or credits that are needed to adjust the wrong, pre-adjusted balances to the right adjusted balances.
6,000
Adjusting entry
6,000
6,000
6,300
Adjusted 12/31/X1 - + + -
Date
Account
Debit
Credit
4. Record the adjusting entry in the General Journal & Post to Ledger.
12/31/X1 Depreciation Expense ,000
Accumulated Depreciation-Building ,000
Part B

15. - + + - Analyze, Record & Post Adjusting Entries in 4 Easy Steps
Example: Estimate $350 of utilities used but not yet billed.
A = L Eq
1. Draw T-accounts and enter the pre-adjusted account balances for each affected account.
Accrued Expenses
Utilities Expense
3,040
Pre-adjusted 12/31/X1
2. Determine what the adjusted account balances SHOULD be.
350
350
Adjusting entry
350
3,390
Adjusted 12/31/X1
3. Determine the debits or credits that are needed to adjust the wrong, pre-adjusted balances to the right adjusted balances. - + + -
Date
Account
Debit
Credit
4. Record the adjusting entry in the General Journal & Post to Ledger.
12/31/X1 Utilities Expense
Accrued Expenses
Part B

16. - + + - - + Analyze, Record & Post Adjusting Entries in 4 Easy Steps
Example: Interest at 5% from 3/1/X1 to 12/31/X1 to be accrued.
A = L Eq
$160,000 * 5% * (10/12) = $6,667
1. Draw T-accounts and enter the pre-adjusted account balances for each affected account.
Interest Payable
Interest Expense
Pre-adjusted 12/31/X1
2. Determine what the adjusted account balances SHOULD be.
6,667
Adjusting entry
6,667
6,667
6,667
Adjusted 12/31/X1 -
3. Determine the debits or credits that are needed to adjust the wrong, pre-adjusted balances to the right adjusted balances. + + -
Date
Account
Debit
Credit
4. Record the adjusting entry in the General Journal & Post to Ledger.
12/31/X1 Interest Expense ,667
Interest Payable ,667
Part B - +

17. - + + - - + Analyze, Record & Post Adjusting Entries in 4 Easy Steps
Example: 2% commission not yet recorded on a $1,000 sale.
$1,000 * 2% = $20
A = L Eq
1. Draw T-accounts and enter the pre-adjusted account balances for each affected account.
Commission Payable
Commission Expense
300
4,020
Pre-adjusted 12/31/X1
2. Determine what the adjusted account balances SHOULD be. 20 20
Adjusting entry
320
4,040
Adjusted 12/31/X1 - +
3. Determine the debits or credits that are needed to adjust the wrong, pre-adjusted balances to the right adjusted balances. + -
Date
Account
Debit
Credit
4. Record the adjusting entry in the General Journal & Post to Ledger.
12/31/X1 Commission Expense
Commission Payable
Part B - +

18. Computation of Income Tax Expense
Sales Revenues $200,000
Interest Revenue
Dividend Income
Total Revenues $200,800
Cost of Goods Sold ,000
Bad Debt Expense
Commission Expense ,040
Insurance Expense ,000
Office Supplies Expense
Utilities Expense ,390
Depreciation Expense ,300
Bank Fees
Interest Expense ,667
Total Expenses $81,307
Net Income Before Taxes $119,493
* 40% = $47,797 Income Tax Expense
Part B

19. - + + - - + Analyze, Record & Post Adjusting Entries in 4 Easy Steps
Example: $47,797 of Income Tax Expense not yet recorded.
A = L Eq
1. Draw T-accounts and enter the pre-adjusted account balances for each affected account.
Income Taxes Payable
Income Tax Expense
Pre-adjusted 12/31/X1
2. Determine what the adjusted account balances SHOULD be.
47,797
47,797
Adjusting entry
47,797
47,797
Adjusted 12/31/X1
3. Determine the debits or credits that are needed to adjust the wrong, pre-adjusted balances to the right adjusted balances. - + + -
Date
Account
Debit
Credit
4. Record the adjusting entry in the General Journal & Post to Ledger.
12/31/X1 Income Tax Expense ,797
Income Taxes Payable ,797
Part B - +

20. The Full Accounting Cycle
Original Transaction Entries
Identify
Analyze
Record
Post
Prepare
Pre-adjusted TB
Adjusting Entries
Identify
Analyze
Record
Post
Prepare
Adjusted TB
Financial Statements
Closing Entries
Identify
Analyze
Record
Post
Prepare
Post-Closing TB
Part B

21. Continued on next slide
Part B

22. Continued from prior slide
Part B

23. Introduction to Accounting Preparing for a User’s Perspective
Analyze, record & post adjusting entries.
Prepare adjusted trial balance.
Debits and Credits Trainer
By Kevin C. Kimball, CPA
with support from
Free Jan. 2014
Available on the Google Play Store
Part B