Ch10 Accruals and Prepayments
Ch10 Accruals and Prepayments
Ch10 Accruals and Prepayments
© McGraw-Hill Education.
3-6
Exh.
3.4
Asset Expense
Unadjusted Credit Debit
Balance Adjustment Adjustment
Adjusting Prepaid Expenses
•On December 1, 2001, Scott Company paid
$12,000 to cover rent for December 2001
through May 2002.
•Let’s look at the adjusting journal entry
needed on December 31, 2001.
Adjusting Prepaid Expenses
•After posting, the accounts involved look like
this:
Expense Liability
Debit Credit
Adjustment Adjustment
Adjusting for Accrued Expenses
Denton, Inc. pays its employees every Friday.
Year-end, 12/31/02, falls on a Wednesday. As of
12/31/02, the employees have earned salaries of
$47,250 for Monday through Wednesday of the
week ended 1/02/03.
Less expenses
Stationery 2,760
Current assets
Prepaid stationery 300
Current liabilities
Accrued stationery 150
Exh.
3.18
Overstated
Understated
REVENUES: Accruals
and
Prepayments
Exh.
3.4
Asset Revenue
Debit Credit
Adjustment Adjustment
Adjusting for Accrued Revenues
Smith & Jones, CPAs, had $31,200 of work completed but
not yet billed to clients. Let’s make the adjusting entry
necessary on December 31, 2002, the end of the
company’s fiscal year.
Adjusting for Accrued Revenues
•After posting, the accounts involved will
look like this . . .
Liability Revenue
Debit Unadjusted Credit
Adjustment Balance Adjustment
Adjusting Unearned Revenue
On October 1, 2002, UAA sold 1,000 season tickets to
its 20 home basketball games for $100 each. UAA
makes the following entry:
Adjusting Unearned Revenue
Unearned Basketball
Revenue Basketball Revenue
12/31 $50,000 10/1 $100,000 12/31 $50,000
Exh.
3.18
Overstated
Understated
Accrued Revenues
Prepaid Revenues
End of Chapter 10