Adeng Pustikaningsih, M.Si.
Dosen Jurusan Pendidikan Akuntansi Fakultas Ekonomi
2
3
1.
Describe the nature of the adjusting
process.
2.
Journalize entries for accounts
requiring adjustment.
3.
Summarize the adjustment process.
4
Describe the nature of the
adjusting process.
Objective 1
Under the
accrual basis of
accounting
, revenues are
reported in the income
statement in the period in
6
The accounting concept that
supports this approach to reporting
of revenues is called the
revenue
The accounting concept that
supports reporting revenues and
related expenses in the same
period is called the
matching
8
Under the
cash basis of
accounting
, revenues and
expenses are reported in the
The analysis and updating of
accounts at the end of the period
before the financial statements
are prepared is called the
10
The journal entries that bring
the accounts up to date at the
end of the accounting period
Example Exercise 3-1
Indicate with a Yes or No whether or not each of the
following accounts normally requires an adjusting entry.
Follow My Example 3-1
a. No c. Yes e. Yes
b. Yes d. No f. Yes
12
Prepaid expenses
, sometimes referred
to as
deferred expenses
, are items that
have been initially recorded as assets
but are expected to become expenses
over time or through the normal
operations of the business.
Unearned revenues
, sometimes
referred to as
deferred revenues
, are
items that have been initially recorded
as liabilities but are expected to become
revenues over time or through the
normal operations of the business.
14
Insert Exhibit 1
Accrued revenues
, sometimes
referred to as
accrued assets
(accrued means unpaid), are
revenues that have been earned
but have not been recorded in
the accounts.
16
Accrued expenses
, sometimes
referred to as
accrued
liabilities
, are expenses that
have been incurred but have
not been recorded in the
accounts.
18
Example Exercise 3-2
Classify the following items as (1) prepaid expense, (2) unearned revenue, (3) accrued expense, or (4) accrued revenue.
For Practice: PE 3-2A, PE 3-2B 17
Follow My Example 3-2
a. Accrued expense c. Unearned revenue
b. Prepaid expense d. Accrued revenue
a. Wages owed but not c. Fees received but not yet
yet paid. earned.
Journalize entries for
accounts requiring
adjustment.
20
Cash 2 065 000
Accounts Receivable 2 720 000
Supplies 760 000
Prepaid Insurance 2 200 000
Land 20 000 000
Office Equipment 1 800 000
Accumulated Depreciation-Equipment 50 000
Accounts Payable 900 000
Wages Payable 250 000
Unearned Rent 240 000
Cinta Cita, Capital 25 000 000 Cinta Cita, Drawing 4 000 000
Fees Earned 16 840 000
Rent Revenue 120 000
Wages Expense 4 525 000 Rent Expense 1 600 000 Depreciation Expense 50 000 Utilities Expense 985 000 Supplies Expense 2 040 000 Insurance Expense 200 000 Misscellaneous Expense 455 000
43 400 000 43 400 000
SolusiNet
Adjusted Trial Balance December 31, 2007
Debit Balances
Credit Balances
3-2
SolusiNet
Supplies
account has a
balance of Rp2,000,000 in the
unadjusted trial balance. Some of
these supplies have been used.
On December 31, a count reveals
Adjusting Process for Prepaid Expenses
Supplies 1 240 000 Supplies used
(Rp2,000,000 – Rp760,000)
Dec. 31 1,240,000
Dec. 31 1,240,000
Supplies Bal. 2,000,000 Supplies Expense Bal. 800,000 14 55 55 14
Dec. 31 Supplies Expense 1 240 000
24
The debit balance of
Rp2,400,000 in SolusiNet
Prepaid Insurance
account
represents the December 1
prepayment of insurance for 12
months.
Prepaid Insurance 15 Insurance Expense
31 Insurance Expense 200 000
Prepaid Insurance 200 000 56
15 Insurance expired
26
Example Exercise 3-3
The prepaid insurance account had a beginning balance of Rp6,400,000 and was debited for Rp3,600,000 of premiums paid during the year. Journalize the adjusting entry required at the end of the year assuming the amount of unexpired
insurance related to future periods is Rp3,250,000.
Follow My Example 3-3
Insurance Expense 6,750,000
Prepaid Insurance 6,750,000 Insurance expired (Rp6,400,000 +
Rp3,600,000 – Rp3,250,000).
On December 1, the tenant
prepaid three months’ rent
for use of an office building
owned by SolusiNet. As of
December 31, only
Rp120,000 has been earned.
2827
Dec. 31 120,000 Dec. 31 120,000
Unearned Rent
Bal. 360,000
Rent Revenue
23 42
31 Unearned Rent 120 000
Rent Revenue 120 000
Example Exercise 3-4
The balance in the unearned fees account, before adjustment at the end of the year, is Rp44,900,000.
Journalize the adjusting entry required if the amount of unearned fees at the end of the year is Rp22,300,000.
Follow My Example 3-4
Unearned Fees 22,600,000
Fees Earned 22,600,000
30
SolusiNet provided Rp500,000
in services during December
for which the customer has not
been billed.
Dec. 31 500,000 Dec. 31 500,000
Accounts Receivable
Bal. 16,340,000 Fees Earned
12 41
Bal. 2,220,000
31 Accounts Receivable 500 000
Fees Earned 500 000
Accrued fees (25 hrs. x Rp20,000)
32
Example Exercise 3-5
At the end of the current year, Rp13,680,000 of fees have been earned but have not been billed to clients. Journalize the adjusting entry to record the accrued fees.
Follow My Example 3-5
Accounts Receivable 13,680,000
Fees Earned 13,680,000
Accrued fees.
At the end of December,
accrued wages amounted to
Rp250,000. Without this
adjusting entry,
Wages
Expense
is understated.
3433
Dec. 31 250,000
Dec.31 250,000
Wages Payable
Bal. 4,275,000
Wages Expense
22 51
31 Wages Expense 250 000
Wages Payable 250 000
Accrued wages.
51 22
Dec. 31 250,000
Dec.31 250,000 Wages Payable
Bal. 4,275,000
Wages Expense
22 51
Bal. 4,525,000
3635
The payment of January 10 wages totaling
Rp1,275,000 is shown below.
Jan. 10 Wages Expense 1 025 000
Wages Payable 250 000
Dec. 31 250,000
Dec.31 250,000 Wages Payable
Bal. 4,275,000
Wages Expense
22 51
Bal. 4,525,000
Jan.10 1,025,000
Jan. 10 250,000
An expense for The liability is
38
Example Exercise 3-6
PT Sumitama Daya pays weekly salaries of Rp12,500,000 on Friday for a five-day week ending on that day. Journalize the necessary adjusting entry at the end of the accounting period, assuming that the period ends on Thursday.
Follow My Example 3-6
Salaries Expense 10,000,000
Salaries Payable 10,000,000 Accrued salaries (Rp12,500,000/5
x 4 days).
Physical resources that are
owned and used by a business
and are permanent or have a
long life are called
fixed
assets
,
or
plant assets
.
40
As time passes, a fixed
asset loses its ability to
provide useful services.
This decrease in
usefulness is called
Normal titles for fixed asset accounts and their
related
contra asset
accounts are as follows:
Fixed Asset Contra Asset
Land None—Land is not depreciated Buildings Accumulated Depreciation—
Buildings
42
SolusiNet estimates the
depreciation on its office
equipment to be Rp50,000
for the month of December.
Depreciation Expense 53 Accum. Depr.—Office Equip. 19
31 Depreciation Expense 50 000 Accum. Depreciation—
Office Equipment 50 000
Depreciation of office equipment.
44
SolusiNet balance sheet would
show the office equipment at
cost, less the accumulated
depreciation.
Office equipment
Rp1,800,000
Less accumulated
depreciation
50,000
Rp1,750,000
Example Exercise 3-7
The estimated amount of depreciation on equipment for the current year is Rp4,250,000. Journalize the adjusting entry to record the depreciation.
Follow My Example 3-7
Depreciation Expense 4,250,000
Accumulated Depreciation—
Equipment 4,250,000
46
Summarize the
adjustment process
Post Ref Adjusting Entries
Dec. 2007 31 Supplies Expense 55 1 240 000
Supplies 14 1 240 000 Supplies used (Rp2,000,000 - Rp 760,000)
31 Insurance Expense 56 200 000
Prepaid Insurance 15 200 000 Insrance expired (Rp2,400,000/12 months)
31 Unearned Rent 23 120 000
Rent Revenue 42 120 000 Rent earned (Rp360,000/3months)
31 Accounts Receivable 12 500 000
Fees Earned 41 500 000 Accrued fees (25 hrs. Rp20,000)
JOURNAL
Date Description Debit Credit
48
(Continued)
Ledger with Adjusting Entries—SolusiNet
47
(Continued)
(In Rp000)
50
(Continued)
Ledger with Adjusting Entries—SolusiNet
49
(Concluded)
Ledger with Adjusting
52
Example Exercise 3-8
For the year ending December 31, 2008, Mega Medika
mistakenly omitted adjusting entries for (1) Rp8,600,000 of unearned revenue that was earned, (2) earned revenue that was not billed of Rp12,500,000, and (3) accrued wages of Rp2,900,000. Indicate the combined effect of the errors on (a) revenues, (b) expenses, and (c) net income for 2008.
Follow My Example 3-8
a. Revenues were understated by Rp21,100,000 (Rp8,600,000 + Rp12,500,000).
b. Expenses were understated by Rp2,900,000. c. Net income was understated by Rp18,200,000
(Rp8,600,000 +Rp12,500,000 – Rp2,900,000). For Practice: PE 3-8A, PE 3-8B
Prepare an adjusted
trial balance.
54
The purpose of the
adjusted
trial balance
is to verify the
equality of the total debit
balances and total credit
balances before the financial
Cash 2 065 000 Accounts Receivable 2 720 000
Supplies 760 000
Prepaid Insurance 2 200 000
Land 20 000 000
Office Equipment 1 800 000
Accumulated Depreciation-Equipment 50 000
Accounts Payable 900 000
Wages Payable 250 000
Unearned Rent 240 000
Cinta Cita, Capital 25 000 000 Cinta Cita, Drawing 4 000 000
Fees Earned 16 840 000
Rent Revenue 120 000
Wages Expense 4 525 000 SolusiNet
Adjusted Trial Balance December 31, 2007
Debit Balances
56
Example Exercise 3-9
For each of the following errors, considered individually, indicate whether the error would cause the adjusted trial balance totals to be unequal. If the error would cause the adjusted trial balance total to be unequal, indicate whether the debit or credit total is higher and by how much.
a. The adjustment for accrued fees of Rp5,340,000 was
journalized as a debit to Accounts Payable for Rp5,340,000 and a credit to Fees Earned of Rp5,340,000.
b. The adjustment for depreciation of Rp3,260,000 was journalized as a debit to Depreciation Expense for
Rp3,620,000 and a credit to Accumulated Depreciation for
Follow My Example 3-9
a. The totals are equal even though the debit should have been to Accounts Receivable instead of
Accounts Payable.
