Adeng Pustikaningsih, M.Si. Dosen Jurusan Pendidikan...

Adeng Pustikaningsih, M.Si.

Dosen Jurusan Pendidikan Akuntansi

Fakultas Ekonomi

Universitas Negeri Yogyakarta

CP: 08 222 180 1695

Email : [email protected]

2

3

The Adjusting Process

3

1. Describe the nature of the adjusting

process.

2. Journalize entries for accounts

requiring adjustment.

3. Summarize the adjustment process.

4. Prepare an adjusted trial balance.

After studying this chapter, you should be

able to:

4

Describe the nature of the

adjusting process.

Objective 1

3-1

3

5

Under the accrual basis of

accounting, revenues are

reported in the income

statement in the period in

which they are earned.

3-1

6

The accounting concept that

supports this approach to reporting

of revenues is called the revenue

recognition concept.

3-1

7

The accounting concept that

supports reporting revenues and

related expenses in the same

period is called the matching

concept, or matching principle.

3-1

8

Under the cash basis of

accounting, revenues and

expenses are reported in the

income statement in the period in

which cash is received or paid.

3-1

9

The analysis and updating of

accounts at the end of the period

before the financial statements

are prepared is called the

adjusting process.

3-1

10

The journal entries that bring

the accounts up to date at the

end of the accounting period

are called adjusting entries.

3-1

11

Example Exercise 3-1

Indicate with a Yes or No whether or not each of the

following accounts normally requires an adjusting entry.

For Practice: PE 3-1A, PE 3-1B 10

Follow My Example 3-1

a. No c. Yes e. Yes

b. Yes d. No f. Yes

a. Cash c. Wages Expense e. Accounts Receivable

b. Prepaid Rent d. Office Equipment f. Unearned Rent

3-1

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.

3-1Items That Need Adjusting

13

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

13

3-1

15

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.


1716

3-1

18


Classify the following items as (1) prepaid expense, (2)

unearned revenue, (3) accrued expense, or (4) accrued

revenue.



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.

b. Supplies on hand. d. Fees earned but not yet

received.

3-1

19

Journalize entries for

accounts requiring

adjustment.

Objective 2

3-2

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

3-2Unadjusted Trial Balance

for SolusiNet

21

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

that Rp760,000 of supplies are on

hand.

3-2Adjusting Process for Prepaid Expenses

@solusinet

22

Supplies (balance on trial balance) Rp2,000,000

Supplies on hand, December 31 – 760,000

Supplies used Rp1,240,000

3-2

23

Supplies 1 240 000

Supplies used

(Rp2,000,000 –

Rp760,000)

Dec. 31 1,240,000Dec. 31 1,240,000

Supplies

Bal. 2,000,000

Supplies Expense

Bal. 800,00014 55

2,040,000760,000

55

14

Dec. 31 Supplies Expense 1 240 0002007

22

3-2

24

The debit balance of

Rp2,400,000 in SolusiNet

Prepaid Insurance account

represents the December 1

prepayment of insurance for 12

months.

3-2

@solusinet

25

Dec. 31 200,000 Dec. 31 200,000

Prepaid Insurance

Bal. 2,400,000

Insurance Expense15 56

2,200,000

31 Insurance Expense 200 000

Prepaid Insurance 200 000

56

15

Insurance expired

(Rp2,400,000/12).

24

3-2

26


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.


Insurance Expense 6,750,000

Prepaid Insurance 6,750,000

Insurance expired (Rp6,400,000 +

Rp3,600,000 – Rp3,250,000).

For Practice: PE 3-3A, PE 3-3B25

3-2

27

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.

3-2

@solusinet

2827

Dec. 31 120,000 Dec. 31 120,000

Unearned Rent

Bal. 360,000

Rent Revenue23 42

31 Unearned Rent 120 000


Rent earned

(Rp360,000/3

months)

23

42

3-2

240,000Bal.

29


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.


Unearned Fees 22,600,000

Fees Earned 22,600,000

Fees earned (Rp44,900,000 –

Rp22,300,000).


3-2

30

SolusiNet provided Rp500,000

in services during December

for which the customer has not

been billed.

3-2

@solusinet

3130

Dec. 31 500,000Dec. 31 500,000

Accounts Receivable

Bal. 16,340,000

Fees Earned12 41

Bal. 2,220,000

31 Accounts Receivable 500 000

Fees Earned 500 000

Accrued fees (25 hrs.

x Rp20,000)

12

41

3-2

2,720,000Bal. 16,840,000Bal.

32


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.


Accounts Receivable 13,680,000

Fees Earned 13,680,000

Accrued fees.


3-2

33

At the end of December,

accrued wages amounted to

Rp250,000. Without this

adjusting entry, Wages

Expense is understated.

3-2

@solusinet

3433

Dec. 31 250,000

Dec.31 250,000

Wages Payable

Bal. 4,275,000

Wages Expense22 51

31 Wages Expense 250 000


Accrued wages.

51

22

3-2

Bal. 4,525,000

3534

Dec. 31 250,000

Dec.31 250,000

Wages Payable

Bal. 4,275,000

Wages Expense22 51

Bal. 4,525,000

3-2

Closing entries will be discussed in a later chapter.

For now, just be aware that Wages Expense is

closed after financial statements are prepare and its

balance rolled back to zero.

3635

The payment of January 10 wages totaling

Rp1,275,000 is shown below.

Jan. 10 Wages Expense 1 025 000


Cash 1 275 000

3-2

37

3-2

Dec. 31 250,000

Dec.31 250,000

Wages Payable

Bal. 4,275,000

Wages Expense22 51

Bal. 4,525,000

Jan.10 1,025,000

Jan. 10 250,000

An expense for

wages of

Rp1,025,000 is

recorded in the

new fiscal year.

The liability is

cancelled.

36

38


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.


Salaries Expense 10,000,000

Salaries Payable 10,000,000

Accrued salaries (Rp12,500,000/5

x 4 days).


3-2

39

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.

3-2

@solusinet

40

As time passes, a fixed

asset loses its ability to

provide useful services.

This decrease in

usefulness is called

depreciation.

3-2

41

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

Store Equipment Accumulate Depreciation—Store

Equipment

Office Equipment Accumulated Depreciation—Office

Equipment

3-2

42

SolusiNet estimates the

depreciation on its office

equipment to be Rp50,000

for the month of December.

3-2

@solusinet

4342

Dec. 31 50,000

Depreciation Expense

Dec. 31 50,000

Accum. Depr.—Office Equip. 1953

31 Depreciation Expense 50 000

Accum. Depreciation—

Office Equipment 50 000

Depreciation of

office equipment.

53

19

3-2

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

Book

value

3-2

45


The estimated amount of depreciation on equipment for the

current year is Rp4,250,000. Journalize the adjusting entry

to record the depreciation.


Depreciation Expense 4,250,000

Accumulated Depreciation—

Equipment 4,250,000

Depreciation on equipment.


3-2

46

Summarize the

adjustment process

Objective 3

3-3

47

Post

RefAdjusting 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


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


Accrued fees (25 hrs. Rp20,000)

31 Wages Expense 51 250 000

Wages Payable 22 250 000

Accrued wages.

31 Depreciation Expense 53 50 000

Accum. Depr.-Office Equip. 19 50 000

Depreciation on office equip.

JOURNAL

Date Description Debit Credit

Adjusting Entry SolusiNet3-3

48

3-3

(Continued)

Ledger with

Adjusting

Entries—SolusiNet

47

(In Rp000)

49

(Continued) 3-3

48

(In Rp000)Ledger with

Adjusting

Entries—SolusiNet

50

(Continued) 3-3

Ledger with

Adjusting

Entries—SolusiNet

49

(In Rp000)

51

(Concluded) 3-3

Ledger with Adjusting

Entries—SolusiNet

50

(In Rp000)

52


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.


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).


3-3

53

3-4

Prepare an adjusted

trial balance.

Objective 4

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

statements are prepared.

3-4

55

Cash 2 065 000

Accounts Receivable 2 720 000

Supplies 760 000


Land 20 000 000

Office Equipment 1 800 000

Accumulated Depreciation-Equipment 50 000

Accounts Payable 900 000


Unearned Rent 240 000

Cinta Cita, Capital 25 000 000

Cinta Cita, Drawing 4 000 000



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

3-4

56


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

Rp3,260,000. 55

3-4

5756


a. The totals are equal even though the debit should

have been to Accounts Receivable instead of

Accounts Payable.

b. The totals are unequal. The debit total is higher by

Rp360,000 (Rp3,620,000 – Rp3,260,000).

For Practice: PE 3-9A, PE 3-9B

3-4

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