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Reversible Adjusting Entries

The document provides information about adjusting entries and reversing entries in the accounting cycle. It gives examples of transactions that occurred in 2019 and 2020 for a company called Kelly Corporation, and asks the reader to prepare adjusting entries for 2019, reversing entries for 2020, journal entries for 2020 transactions excluding adjustments, adjusting entries for 2020, and ending balances for certain accounts in 2020 based on the information provided.

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Annie Rapanut
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171 views3 pages

Reversible Adjusting Entries

The document provides information about adjusting entries and reversing entries in the accounting cycle. It gives examples of transactions that occurred in 2019 and 2020 for a company called Kelly Corporation, and asks the reader to prepare adjusting entries for 2019, reversing entries for 2020, journal entries for 2020 transactions excluding adjustments, adjusting entries for 2020, and ending balances for certain accounts in 2020 based on the information provided.

Uploaded by

Annie Rapanut
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Mnemonic for Reversible Adjusting Entries (DIAPER):

D - deferrals/ Pre-collections under


I - income Method
A - accruals (Expense and Income)
P - prepayments under
E - expense Method are
R - reversible Adjusting Entries

ADJUSTING ENTRIES AND REVERSING ENTRIES


Review of Accounting 1

LEARNING OUTCOMES

 Elaborate the use of adjusting entries in the accounting cycle; and


 Discuss the purpose of reversing entries in the accounting cycle.

The eight stages of accounting cycle

1. Identifying business transactions


2. Recording business transactions
3. Ledger posting
4. Prepare un-adjusted trial balance
5. Adjusting entries
6. Prepare adjusted trial balance
7. Prepare financial statement
8. Closing books of accounts

Exercise- Review of accounting cycle (Adjusting and reversing entries)

The following transaction occurred during the year 2019 and 2020:

2019
October 20 Kelly corporation purchases various office supplies in cash amounting to
20,000
November 1 Kelly received a 6-month rental fee of 30,000 from a tenant upon occupation
of a space being rented out on the same date.
November 18 Kelly purchased an equipment in cash amounting to 50,000. This equipment
is available for use on the same date. It has a useful life of 5 years.
November 30 The entry received CAGELCO electric bill for the month ended November 30
amounting to 25,000
December 4 The entity paid the electric bill.
December 15 The entity received a 3-month promissory note from a customer for a sale of
goods amounting to 10,000. The note bears an interest of 10%.
December 31 The entity received CAGELCO electric bill for the month ended December 30
amounting to 28,000
Additional information
1. the remaining office supplies after a count on December 31 is 5,000
2. The entity uses the expenses method of recording prepayments and the
revenue method of recording pre-collections.
2020
January 3 The entity paid the December electric bill.
March 15 The entity received the payment of the customer’s promissory note
including the 3-month interest
June 9 Kelly corporation purchased various office supplies in cash amounting to
60,000
August 31 Kelly received a 6-month rental fee of 60,000 from a tenant upon occupation
of a space being rented out on the same date.
November 30 The entity received CAGELCO electric bill for the month ended November 30
amounting to 27,000
December 5 The entity paid the electric bill
December 31 The entity received CAGELCO electric bill for the month ended December 30
amounting to 32,000
Additional information
1. The remaining office supplies after a count on December 31 is 7,000

Required:

Write your answers in your JOL. This is not a recorded assessment. This will be discussed tomorrow.
Please do not attend the live discussion if you did not answer this Exercise. Thank you.

1. Provide all the adjusting entries in 2019


2. Provide the reversing entries in 2020
3. Provide the journal entries (other than adjusting entries) for the transactions that occurred in
2020.
4. Provide the adjusting entries in 2020
5. Compute the balance of the following accounts in 2020 based on the transactions given (Tip: use
your T-Account):
a. Utilities expense
b. Supplies expense
c. Interest income
d. Rent income
e. Depreciation expense

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