Adjusting Accounts

For
Financial Statements
Chapter 3
 The Accounting Period

• To provide timely information, accounting systems prepare reports at regular intervals.

The time period assumption presumes that an organization’s activities can be divided
into specific time periods such as a month, a three-month quarter, a six-month interval,
or a year.

• Most organizations use a year as their primary accounting period. Reports covering a
one-year period are known as annual financial statements. Many organizations also
prepare interim financial statements covering one, three, or six months of activity.
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 An organization can use a fiscal year consisting of
any 12 consecutive months or 52 weeks.

正在载⼊…
Companies with little seasonal variation in sales
often use the calendar year as their fiscal year.
Facebook uses calendar-year reporting.

Companies that have seasonal variations in sales

often use a natural business year end, which is when
sales are at their lowest level for the year. The natural
business year for retailers such as Target and Dicks
Sporting Goods ends around January 31, after the
holidays.

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 Accrual Basis versus
Cash Basis Definitions
Accrual Basis Cash Basis
Revenues are recorded Revenues are recorded
when products or when cash is received and
services are delivered, expenses are recorded
and records expenses when cash is paid.
when incurred.
Cash basis 是指商品及服務的銷售⾏為發⽣的時候，⽴即記錄於現⾦收⼊當中，⽽在購⼊商品及
使⽤服務的時候，⽴刻記錄為現⾦⽀出。 Accrual basis 是指會計⼊賬不以現⾦收付作為會計確
認的標準。⽽是以交易和事項是否實際發⽣為確認基礎。在權責制基礎下，未來的經濟利益(資
產)和未來經濟利益的付出(負債)與款項是否實際收付無關。現⾦基礎的會計⽅法關註的是實際的 4
現⾦流動，⽽權責基礎的⽅法關註的是業務發⽣的時間點。
 For your self-reading
反映真實的財務狀況：權責基礎的會計⽅法能夠更准確地反映企業的真實財務狀況。它不僅僅基於實
際發⽣的現⾦流動，⽽是根據業務發⽣的時間點進⾏記錄。這樣，它能夠提供⼀個更全⾯的財務狀
況，包括尚未收到或⽀付的款項。
正在载⼊…
更准確的業績評估：權責基礎的⽅法允許企業更准確地評估其業績。它將所有的收⼊和費⽤與它們實
際的發⽣時間聯繫起來，⽽不是與現⾦流⼊流出的時間。這樣，企業可以更好地了解⾃⼰在特定時期
的經營狀況，更好地評估業務的盈利能⼒和效率。

提供更准確的決策依據：權責基礎的會計⽅法能夠提供更准確的決策依據。它能夠給出⼀個更全⾯的
財務狀況，更好地評估業務的盈利能⼒和幹勁。這使得企業能夠更明智地做出決策，⽐如投資決策、
借貸決策等。
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 FastForward paid $2,400 for 24 months of insurance
On the accrual basis, $100 of coverage that began on December 1, 2021. Accrual
insurance expense is accounting requires that $100 of insurance expense
recognized in 2021, $1,200 be reported each month, from December 2021
through November 2023. (This means expenses are
in 2022, and $1,100 in 2023. $100 in 2021, $1,200 in 2022, and $1,100 in 2023.)
The expense is matched with Exhibit 3.2 shows this allocation of insurance cost
across the three years. Any unexpired premium is
the periods benefited by the reported as a Prepaid Insurance asset on the accrual
insurance coverage. basis balance sheet.

能夠真實反映當時的經營收⼊和⽀出，⽽且更加準確地計
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算和確定企業的經營成果，在企業會計中被普遍採⽤。
On December 1, 2021, FastForward paid A cash basis income statement for December 2021
reports insurance expense of $2,400, as shown in Exhibit
$2,400 for 24 months of insurance 3.3. The cash basis income statements for years 2022 and
coverage. 2023 report no insurance expense. The cash basis balance
Using the cash basis, the entire $2,400 sheet never reports a prepaid insurance asset because it is
would be recognized as insurance immediately expensed. Also, cash basis profit for 2021–
2023 does not match the cost of insurance with the
expense in 2021. No insurance expense insurance benefits received for those years and
from this policy would be recognized in months.
2022 or 2023, periods covered by the
未能正確計算和確定企業的當時的損益。因此，它只適⽤
policy. 於業務⽐較簡單的企業。
回想⼀下chapter1學過的會計原則
Recognizing Revenues

The revenue recognition requires that revenue be

recorded when the goods or services are provided to
customer and at an amount expected to be received
from customers.

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Recognizing Expenses

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 ⽣活中發⽣的交易不可能每次都在⼀個會計周期内完成。

Adjusting entries

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 • Image you were a singer，每天晚上演唱歌曲直到深夜。
在⼀次演出後，發觀眾還沒有付款。在會計中，調整
記錄（adjusting entries）就像是將這筆⽋款記⼊賬簿的
過程。

• 調整記錄的⽬的是確保賬簿准確反映企業的真實財務
狀況。盡管會計憑證通常記錄了實際的現⾦流動，但
有些交易和事件可能無法⽴即記錄。⽽調整記錄就是
為了糾正這些遺漏或延遲的交易。

正在载⼊…
• 盡管當時的演出已結束，但併沒有收到所有觀眾的付
款。調整記錄將會在會計賬簿中補充這筆⽋款，以反
映實際收到的⾦錢。這樣，賬簿就更准確地展示了業
務收⼊和債務。

• 調整記錄的意義在於提⾼企業財務報告的准確性和可
靠性。它確保了在每⼀個會計周期結束時，所需要的
調整都被正確地記錄下來。這對於企業的管理者、投
資者、債權⼈和其他利益相關者來說都⾮常重要，因
為他們依賴於准確的財務信息做出決策。

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• 調整分錄通常在會計周期結束時做，以確保財務報
錶准確地反映了該周期內的交易和事件。會計周期
可以是⽉度、季度或年度。

• 需要註意的是，某些企業可能會在每個會計的結束
時進⾏調整分錄，⽽其他企業則可能更頻繁地進⾏
調整，例如每⽉每季。這取決於企業的需求和實
踐。但無論何時進⾏調整分錄，都需要確保它們在
編制財務報錶之前完成。

• Each adjusting entry made at the end of an accounting

period reflects a transaction or event that is not yet
recorded. An adjusting entry affects one or more
income statement accounts and one or more balance
sheet accounts.

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 Framework for Adjustments
Four types of adjustments exist for transactions and
events that extend over more than one period. 四種類型
的調整分錄

Adjustments are made using a 3-step process:

Step 1: Determine what the current account balance equals.
Step 2: Determine what the current account balance should
equal.
Step 3: Record an adjusting entry to get from step 1 to step 2.

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Pay 100% attention!

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 Prepaid (Deferred) Expenses
Prepaid expenses are assets paid for in advance of
receiving their benefits.
Examples: Prepaid Insurance, Prepaid Rent,
Supplies
This adjustment shows the using up of prepaid expenses. To demonstrate accounting for
prepaid expenses, we look at prepaid insurance, supplies, and depreciation. In each case
we decrease an asset (balance sheet) account and increase an expense (income
statement) account at the end of the period.

調整已經預付的款項！（提前⽀付的費⽤）

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⼝诀：Prepaid expense （it’s an asset）
调整分录：转资产为费⽤

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 Adjusting for Prepaid
Insurance
Step 1: Determine current balance:
Step 1
• FastForward paid $2,400 to cover insurance for 24 months
that began on December 1 of 2021.
• FastForward recorded the expenditure as Prepaid Insurance
on December 1.

PREPAID INSURANCE
24-month policy
Beginning 12/01
$2,400
Prepaid insurance 是
⼀個資產賬⽬！預付
的保險費。

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 Adjusting for Prepaid Insurance
Step 2
Step 2: As time passes, the
benefits of the insurance
gradually expire and a portion of
the Prepaid Insurance asset
becomes expense. For instance,
one month’s insurance coverage
expires by December 31, 2021.
This expense is $100, or 1/24 of
$2,400, which leaves $2,300.

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 Adjusting for Prepaid Insurance
期末減少資產（預付的保險費

Step 3 ⽤），增加費⽤。

Step 3: The adjusting entry to record this expense and reduce the asset, along with T-account
postings, follows.

After adjusting and posting, the $100 balance in Insurance Expense and the $2,300 balance in
Prepaid Insurance are ready for reporting in financial statements. 20
⼝诀：Prepaid expense
调整分录：转资产为费⽤

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 Adjusting for Supplies 購買的⽤品
Step 1: FastForwardSteps 1 $9,720
purchased and of 2 supplies in
December. Some of these were used during December.
Step 2: A physical count shows that unused supplies equal
$8,670.

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 Adjusting for Supplies 購買的⽤品
Step 1: FastForwardSteps 1 $9,720
purchased and of 2 supplies in
December. Some of these were used during December.
Step 2: A physical count shows that unused supplies equal
$8,670.

SUPPLIES
Purchases during December $9,720

Step 2: When FastForward computes (physically counts) its remaining unused supplies at December 31, it
finds $8,670 of supplies remaining of the $9,720 total supplies. The $1,050 difference between these two
amounts is December’s supplies expense.
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 Adjusting for Supplies Step 3
Step 3: Adjusting entry reduces Supplies by $1,050 or the
difference between the beginning balance and the physical
count. The balance of the Supplies account is $8,670 after posting—equalling the cost of
the remaining supplies.

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 預付的廣告費、訂閲雜志費等
都是⼀樣的操作模式
No need AA when they are in the
Same accounting period 26
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折舊(英⽂：Depreciation)是⼀種將固定資產(有形資產)的
成本，

按照使⽤年限或預期壽命進⾏分配的⽅式，代表⼀項資產
的價值被⽤掉了多少。

資產折舊可以幫助公司從資產中獲得收益，在資產使⽤的
每⼀年⽀出⼀部分成本。若是沒有將折舊問題考慮進來，
會影響公司的收益。

公司在購買⼀項資產時，最初可能會⽀付全部的現⾦，但
資產要經過很⻑⼀段時間才能幫公司提升收益，因此在財
務報表的顯示上，這個費⽤會以折舊來分攤。

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想象⼀輛嶄新的汽⾞，從汽⾞展廳購買了這輛汽⾞。但是
隨著時間的推移和使⽤，這輛汽⾞的價值會逐漸降低。在
會計中，摺舊就是⽤來反映這種價值降低的過程。

摺舊可以理解為將期資產（如機器、設備房屋等）的成本
分攤到它們的使⽤年限中去。實際上，這就像是將妳購買
汽⾞的費⽤分攤在妳使⽤它的幾年時間裏。

正在载⼊…
假設購買了⼀輛汽⾞，花費了,000美元，併且這輛⾞的使
⽤壽命是5年。在會計中，需要每年將⾞的價值減少2,000
美元，這就是depreciation。這樣，在每個會計年度結束
時，妳需要將2,000美元的depreciation expense 記錄在賬
簿上。

所以， depreciation就像是將⻑期資產的成本在其使⽤壽
命中分攤的過程，以反映資產價值的逐漸減少。這使得企
業能夠准確地記錄資產的價值和利潤，併且有助於做出合
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理的資產管理決策。
 Depreciation 折舊
Instead of expensing the cost of a property, plant and
equipment (equipment, building, cars, etc.) in the
year it is purchased we allocate or spread out the
cost over their expected useful lives.
The formula for straight-line depreciation is:

Straight-Line Asset Cost - Residual Value

Depreciation =
Expense Useful Life

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 Adjusting for Depreciation – Step
• 1 equipment on Dec 1 for
Step 1: FastForward purchased
$26,000.
• It has an estimated useful live of 5 years.
• The equipment is expected to be worth about $8,000 at
the end of five years.
• They purchased the equipment on Dec. 1 but it is now
Dec. 31.

Because FastForward expects the equipment to be worth $8,000

when the five years are over, only $18,000 of the cost needs to be
spread over the next 60 months.
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 Adjusting for Depreciation– Step 2
• Step 2: Equipment has a useful live of 5 years. The
equipment is expected to be worth $8,000 at the end of
five years. FastForward using straight-line
depreciation. $18,000 ($26,000 – 8,000) of the cost
needs to be spread over the next 60 months.

One month = $18,000 / 60 = $300.

直線折舊法是指將資產原值扣除淨殘值後，在預計使⽤年限內平均攤銷。年折舊費
為購置成本扣除殘值後，再除以預計使⽤年限。

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 Adjusting for Depreciation – Step
3

• Step 3: Record adjusting entry for $300 for one month.

• The depreciation amount of $300 is credited to
Accumulated Depreciation account instead of the asset
account, Equipment.

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Accumulated Depreciation is a separate contra account. A contra account is an account linked with
another account, it has an opposite normal balance, and it is reported as a subtraction from that other
account’s balance. FastForward’s contra account of Accumulated Depreciation— Equipment is
subtracted from the Equipment account in the balance sheet.

備抵賬⼾（ contra accounts ）是⽤來抵減被調整賬⼾的余額以求得被調整賬⼾實際余額的賬

⼾。 累計折舊是固定資產的備抵類賬⼾

The Accumulated Depreciation contra account includes total depreciation expense for all prior periods
for which the asset was used.

Accumulated depreciation - equipment 账户和 equipment 账户是密切相关的。equipment账户上记录了汽⻋

的成本，⽽累计折旧-设备账户上记录了汽⻋折旧的累计⾦额。当你想知道汽⻋的净值时，你可以通过减
去累计折旧-设备账户上的⾦额来计算出来。
这种关系可以理解为，equipment账户是⽤来记录汽⻋的原始成本，累计折旧-设备账户是记录花费在汽⻋
上的折旧费⽤的地⽅。综合起来，这两个账户提供了关于汽⻋价值变化的信息，帮助企业准确计算资产
价值并做出相应的决策。
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To demonstrate, on February 28, 2020, after three months of adjusting entries, the
Equipment and Accumulated Depreciation accounts appear as in Exhibit 3.6.

The $900 balance in the Accumulated Depreciation account is subtracted from its
related $26,000 asset cost.

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 Depreciation – Balance Sheet

The difference ($25,100) between these two balances is called book value, or net amount, which is
the asset’s costs minus its accumulated depreciation.

“累計折舊”賬⼾屬於資產類的備抵調整賬⼾，其結構與⼀般資產賬⼾的結構剛好相反，貸⽅登記增
加，借⽅登記減少，餘額在貸⽅。 Accumulated Depreciation has a normal credit balance; it
decreases the asset’s reported value 38
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 Deferral of Revenue 延遲確認利潤
（提前收到款項）
Unearned revenue is cash received in advance
of providing products or services.

Unearned revenues, or deferred

revenues, are liabilities. When cash is
accepted, an obligation to provide
products or services is accepted.

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Deferral of Revenue 延遲確認利潤
（提前收到款項）
Unearned revenue is cash received in advance
of providing products or services.

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Unearned revenues are common in sporting and concert events. When the
Boston Celtics receive cash from advance ticket sales, they record it in an
unearned revenue account called Deferred Game Revenues. The Celtics
record revenue as games are played.

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 Adjusting for Unearned Revenues –
Steps 1 and 2
Step 1: FastForward’s client paid 60-day fee in advance
covering the period from 12/27 – 2/24 and recorded:

Step 2: FastForwards earns payment as time passes. At

12/31, 5 days’ service is earned or 5/60 x $3,000 = $250.

The revenue recognition principle requires that $250 of unearned revenue be reported as
revenue on the December income statement.
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 Adjusting for Unearned Revenue –
Step 3

Step 3: The adjusting entry to reduce the liability account and recognize earned revenue, along with T-
account postings, follows.
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⼝诀：转债为收⼊

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Accrued Expense 已經發⽣的費⽤
Costs incurred in a period that are
both unpaid and unrecorded. ⼝诀：补记当期费⽤
Accrued expenses are costs that are incurred in a period that are both unpaid and
unrecorded. Accrued expenses are reported on the income statement for the period when
incurred. 已經發⽣的費⽤，尚未記錄的，在期末我們要通過調整分錄去記錄。

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Accrued Expense 已經發⽣的費⽤
Costs incurred in a period that are
both unpaid and unrecorded.

Accrued expenses are costs that are incurred in a period that are both unpaid and
unrecorded. Accrued expenses are reported on the income statement for the period when
incurred.

Adjusting entries for recording accrued expenses increase the expense (income
statement) account and increase a liability (balance sheet) account, as shown in Exhibit
3.9. This adjustment recognizes expenses incurred in a period but not yet paid. Common
examples of accrued expenses are salaries, interest, rent, and taxes. We use salaries and
interest to show how to adjust accounts for accrued expenses. 已經發⽣的費⽤，尚未記
錄的，在期末我們要通過調整分錄去記錄。
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⼝诀：补
记当期费
⽤60
 Adjusting for Accrued Salaries –
Steps 1 and 2
Step 1: FastForward’s pays its employee $70 per day, or
$350 for a five-day work. Salaries are paid every two
weeks on a Friday.
Step 2: 12/31 is a Wednesday, so three day’s salaries are
owed at year end which equals $70 x 3 = $210.

Exhibit
3.10

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 Adjusting for Accrued Salaries –
Step 3

Step 3: The adjusting entry for accrued salaries, along with T-account postings, follows.

Salaries expense of $1,610 is reported on the December income statement, and $210 of salaries
payable (liability) is reported in the balance sheet.
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 Future Payment of Accrued Expenses
Accrued expenses at the end of one period result in a cash
payment in a future period.
On 12/31, FastForward recorded accrued salaries of $210.
On 1/9 of the next year, the following entry will reduce the
accrued liability, salaries payable, and record the
expense for 7 days work in January.

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 Accrued Revenue 已經實現的利潤
Accrued revenues are revenues earned in a period
that are both unrecorded and not yet received in cash
or other assets.

The adjusting entries for accrued revenues

increase a revenue (income statement) account
and increase an asset (balance sheet) account.
Accrued revenues usually come from services,
products, interest, and rent. 已經實現的利潤，
尚未被記錄的，在期末我們要通過調整分錄
記錄鴨！
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⼝诀：补记当期利润

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 Adjusting for Accrued Services Revenue
–
Steps 1 customer
Step 1: On 12/12, FastForward’s and 2 agreed to pay $2,700
on 1/10 of the next year for future services over the next 30
days.

Step 2: 12/31, 20 days worth of services have been provided and

earned which totals $1,800 ($2,700 x 20/30 days).

The revenue recognition principle requires FastForward to

report the $1,800 on the December income statement.
The balance sheet reports that the club owes FastForward
$1,800.
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Accrued revenues are recorded
when adjusting entries are made at
the end of the accounting period.
These accrued revenues are earned
but unrecorded because either the
buyer has not yet paid or the seller
has not yet billed the buyer.

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 Adjusting for Accrued Services Revenue –
Step 3

Step 3: The adjusting entry for accrued services, along with T-account postings, follows.

Accounts receivable are reported on the balance sheet at $1,800, and the $7,850 total of consulting revenue is
reported on the income statement. 76
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記錄尚未確認的利息利潤
操作類似

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 Future Receipt of Accrued Revenues
Accrued revenue at the end of one period results in a cash receipt
in a future period.
On 12/31, FastForward recorded accrued revenue earned of
$1,800.
On 1/10 of the next year, the following entry will reduce the
accounts receivable, record revenue earned for 10 days and
receipt of $2,700 cash.

When FastForward receives $2,700 cash on January 10 for the entire contract amount, it
makes the following entry to remove the accrued asset (accounts receivable) and record
revenue earned in January. The $2,700 debit is the cash received. The $1,800 credit is
the removal of the receivable, and the $900 credit is revenue earned in January. 79
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正在载⼊…

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 Links to Financial Statements
Exhibit 3.12 summarizes the four adjustments. Each adjusting
entry affects one or more income statement (revenue or expense)
accounts and one or more balance sheet (asset or liability)
accounts, but never the Cash account.

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Imagine you work at a company and at the end of an accounting period, you need to prepare financial
statements. You gather all the account balances and list them on a trial balance. This trial balance is the
Unadjusted Trial Balance.

However, you realize that there are certain factors to consider, such as unrecorded revenues or
expenses, prepaid expenses, and expenses paid but not yet used. These factors can affect the financial
condition of the company and the accuracy of the financial statements. So, you begin to examine each
account, identify these adjusting items, and record them on the trial balance. This process is called
adjusting entries, and it transforms the trial balance from an unadjusted state to an adjusted state.

Adjusting entries may change the balances of certain accounts, such as increasing or decreasing
revenues or expenses. The purpose of these adjustments is to ensure that the financial statements reflect
all transactions and adjustments accurately.

After you complete the adjusting entries, the trial balance becomes the Adjusted Trial Balance. This
adjusted trial balance is used to prepare accurate financial statements, such as the balance sheet,
income statement summary trial is like the process of checking and adjusting the financial data of a
company to ensure the accuracy of the financial statements. It is a critical step to review and correct any
unrecorded or inaccurately recorded financial information, and to provide reliable and accurate financial
reports.
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Adjusted Trial Balance

An unadjusted trial balance is a list of

accounts and balances before adjustments
are recorded. An adjusted trial balance is a
list of accounts and balances after adjusting
entries have been recorded and posted to the
ledger.

Exhibit 3.13 shows both the unadjusted and

the adjusted trial balances for FastForward
at December 31, 2021. The order of
accounts in the trial balance usually matches
the order in the chart of accounts. Several
new accounts usually arise from adjusting
entries.

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We can prepare financial statements directly from information in the adjusted trial
balance.

Textbook p. 99

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Supplementary exercise!

89
On December 14 Bench Company received $3,700 cash for
consulting services that will be performed in January. Bench
records all such prepayments in a liability account. Prepare a
general journal entry to record the $3,700 cash receipt.

90
On December 31, Connelly Company had performed $5,000 of
management services for clients that had not yet been billed.
Prepare Connelly's adjusting entry to record these fees earned.

91
Prior to recording adjusting entries on December 31, a company's
Store Supplies account had an $880 debit balance. A physical
count of the supplies showed $325 of unused supplies available as
of December 31. Prepare the required adjusting entry.

92
Prepare general journal entries on December 31 to record the following unrelated year-end
adjustments.
a. Estimated depreciation on office equipment for the year, $4,000.
b. The Prepaid Insurance account has a $3,680 debit balance before adjustment. An examination
of insurance policies shows $950 of insurance expired.
c. The Prepaid Insurance account has a $2,400 debit balance before adjustment. An examination
of insurance policies shows $600 of unexpired insurance.
d. The company has three office employees who each earn $100 per day for a five-day
workweek that ends on Friday. The employees were paid on Friday, December 26, and have
worked full days on Monday, Tuesday, and Wednesday, December 29, 30, and 31.
e. On November 1, the company received 6 months' rent in advance from a tenant whose rent is
$700 per month. The $4,200 was credited to the Unearned Rent account.
f. The company collects rent monthly from its tenants. One tenant whose rent is $750 per month
has not paid his rent for December.

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