ACCG100 Lecture Notes - Lecture 5: Uptodate, Deferral, Accrual

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Week 5
Adjusting entries
E.g. prepaid entries, unearned revenue (subscriptions), accruals (salaries, revievable)
Only on the LAST DAY of the accounting period (usually monthly, depends on the business)
Cash at bank cannot be used in adjusting entries!!!
It uses the double entry system where one entry MUST have a debit, and a credit.
*Adjusting entries can also be used to correct past bookkeeping errors
Posting adjusting entries to general ledgers
Narrative is written as (adjusting entry for e.g. rent expenses)
Depreciation all assets, except land, depreciates
You journalise it as Dr depreciation expense, Cr accumulated depreciation
Accumulated depreciation is a contra asset (def in slides) and has a credit balance
Useful life- how many years will the asset generate benefits for you?
Residual value how much can you sell it for at the end of a period, usually this is 0
Straight line method of allocating the cost
Construct an adjusted trial balance
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Document Summary

Week 5: e. g. prepaid entries, unearned revenue (subscriptions), accruals (salaries, revievable, only on the last day of the accounting period (usually monthly, depends on the business, cash at bank cannot be used in adjusting entries!! It uses the double entry system where one entry must have a debit, and a credit. *adjusting entries can also be used to correct past bookkeeping errors. Posting adjusting entries to general ledgers: narrative is written as (adjusting entry for e. g. rent expenses) The cash basis and the accrual basis of accounting. Revenues and expenses can be recorded or recognised on either a cash or an accrual basis. Under cash-based accounting, revenue is recorded only when the cash is received, and an expense is recorded only when cash is paid. When the majority of the transactions are carried out using cash (i. e. they have few receivables and payables), the cash basis will produce similar results to the accrual basis and is simpler to operate.

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