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CHAPTER 2: ANALYZING AND RECORDING TRANSACTIONS
Accounting Cycle
A step-by-step process of record!"# c$%ssfy!" %!d s&''%r(!"eco!o'c tr%!s%cto! of % b&s!ess)
Ge!er%tes &sef&$ !for'%to! ! t*e for' of +!%!c%$ st%te'e!ts
,SOPL#SOP#SOCE.
Process (Steps in Accounting cycle)
/) A!%$yse %!d record tr%!s%cto!s &s!" 0o&r!%$ e!tres2) Post 0o&r!%$ e!tres to $ed"er %cco&!ts ,T 1 %cco&!ts.) Prep%re t*e &!%d0&sted tr%$ b%$%!ce3) Prep%re t*e %d0&st!" e!tres re4&red %t t*e e!d of %cco&!t!" perod
5) Prep%re t*e %d0&sted tr%$ b%$%!ce6) Prep%re t*e +!%!c%$ st%te'e!ts ,SOPL#SOCE#SOP.7) C$ose %$$ te'por%ry %cco&!ts ,e") Acc) Rece8%b$es.9) Prep%re post-c$os!" tr%$ b%$%!ce ,Debt sde Credt Sde.
General Ledger
Co!t%!s '%! %cco&!ts ,b%$%!ce %re s*o;! ! '%0or +!%!c%$ st%te'e!ts.
D8ded !to se8er%$ c%te"ores :
I) AssetsII) L%b$tesIII) S*%re Ho$derpe!ses
=I) G%!s?Loss
Accounts
Record of !cre%se?decre%se ! t*e spec+c %cco&!ts ,e") Assets# $%b$tes
%!d etc).
Assets : C%s*# Acc) Rece8%b$e# I!8e!tory# Prep%d E>pe!se# @otor =e*c$es %!d
etc)
Liabilities: Acc) P%y%b$e# !e%r!ed Re8e!&es %!d etc)
Share Holder’s Capital and Revenues
!penses: t$ty# Deprec%to!# A'ort(%to!?P%te!t %!d etc)
PREPARE
TRIAL
BALANCE
POST TO
LEDGER
ANALYZE RECORD
ORNAL
ENTRY
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Accounts’ "ature : I!cre%se? Decre%se t*ro&"* Debt? Credt
Dr)Liabilities Cr)
-
Decre%se
I!cre%se
#ased on the Accounting $uation:
ASSETS LIABILITIES EITIES ,TO BE BALANCED
IN THE SOP.
ASSETS LIABILITIES EITIESCASH
ACC
RECEI=ABLE
EIP@ENTS
PREPAID
EFPEN)
ACC PAYABLE
ACCRED EFPENSE EG)
SALARY PAYABLE
NEARNED RE=ENE
SHARE CAPITAL
DI=IDEND
%& RC&R' %RA"SAC%&"S " G"RAL L'GR (% ACC&*"%) A"'
+&*R"AL
EFA@PLE: Opp% Sd!) B*d bo&"*t an e$uip,ent for R- ./00 cash)
So$&to!s:
C$%ssfy ;*c* %cco&!ts !8o$8ed) , E4&p'e!t ,%sset. %!d C%s* ,%sset. .
Deter'!e ;*c* !cre%se or decre%se , B&y E4&p'e!t I!cre%ses. , P%y
C%s* Decre%ses.
+ournali1e2
Dr) E4&p'e!t /5
Cr) C%s* /5
Dr) Assets Cr)
-I!cre%se
Decre%se
Dr) E>pe!sesCr)
-I!cre%se
Decre%se
Dr) S%$es Re8Cr)
-
Decre%se
I!cre%se
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E4&p'e!t Acc
%!-/ C%s* /5 %!-/ B%$%!ce c?d /5
/5 /5
b%$%!ce b?d /5
C%s* Acco&!t
%!- b%$%!ce b?d 25 %!-/ E4&p'e!t /5
b%$%!ce c?d J /
25 25
eb-
/ b%$%!ce b?d /
3#alance b4d 'e%!s t*e pre8o&s b%$%!ce of t*e c%s* %cco&!t before t*e
p&rc*%se t%Kes p$%ce)
O! t*e / %!# Opp% bo&"*t %! E4&p'e!t for R@/5 C%s*) T*&s# t*e C%s*
Acco&!t ;$$ be CREDITED !dc%t!" t*ere s % 'CRAS ! t*e %'o&!t of
c%s*)
5#alance c4d 'e%!s t*e b%$%!ce of c%s* ATER t*e p&rc*%se t%Kes p$%ce) T*&s
t*s %'o&!t ;$$ be c%rred do;! to t*e !e>t 'o!t* ,e>p$%!!" ;*y t*e b%$%!ceb?d of / o! t*e /st ebr&%ry.
Tr%$ B%$%!ce ,or'%t.
CH SDN) BHD ,!%'e of co'p%!y.
Tr%$ B%$%!ce for t*e ye%r e!ded / Dece'ber 2>>
Acco&!t Tt$e R@ ,Dr. R@ ,Cr.C%s* FAcco&!t Rece8%b$e FI!8e!tores FL%!d %!d B&$d!" FPrep%d E>pe!se FS%$es FS%$es Ret&r! %!d Dsco&!t FP&rc*%ses FP&rc*%ses Ret&r! %!d Dsco&!t F
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Acco&!t P%y%b$e FS*%re C%pt%$s FDr%;!"s FD8de!ds F
t$tes E>pe!se FFF FF
I!co'e St%te'e!t ,SOCI?SOPL?IS.
))N%'e of Co'p%!y))St%te'e!t of Pro+t or Loss for t*e ye%r e!ded /
Dec 2>> R@ R@
S%$es >
,-. S%$es Ret&r! %!d A$$o;%!ce ,>.NetS%$es >>
,-. Cost of Goods So$dO't
Be"!!!" I!8e!tory >
,. P&rc*%ses >,-. P&rc*%se Ret&r! %!dDsco&!t ,>.
Net P&rc*%se >
,-. E!d!" I!8e!tores ,>. ,>>.
Gross I!co'e >>
,. Re8e!&es >
>>
,-. E>pe!sesI!s&r%!ceE>pe!se >
Deprec%to! >
Ad8erts!" >S%$%resE>pe!se > ,>>.Net I!co'e ? Net $oss ,fNe"%t8e. >>
CH SDN BHD
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St%te'e!t of C*%!"es ! E4&ty for ye%r e!ded /
Dece'ber 2>>
R@
Ope!!" B%$%!ce ,%! /. >
,. Net I!co'e?Loss >
,.Addto!%$ C%pt%$s >
>>
,-. D8de!ds. ,>>.
Ret%!ed E%r!!" ,Dec /. >>
o't COGS f t*e Co'p%!y pro8des ser8ces !ot
prod&ctHC Sd!) B*d)
St%te'e!t of !%!c%$ Posto! %s %t / Dece'ber 2>> R@
No! C&rre!t Assets
L%!d >
B&$d!" M NB= >
@otor =e*c$e M NB= >
>>C&rre!t Assets
C%s* >
Acco&!t P%y%b$e >
I!8e!tores >
Prep%d E>pe!se >
Tot%$ Assets # >>
No!-C&rre!t L%b$tes
Lo!" Ter' Lo%! >
C&rre!t L%b$tes
Acco&!t P%y%b$e >
Accr&ed E>pe!ses ,p%y%b$e %cco&!t. >
!e%r!ed Re8e!&e >
>>
E4&ty
S*%re C%pt%$ >
,.Ret%!ed E%r!!" ,Dec /. > Tot%$ L%b$tes O;!ers E4&ty # >>
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J T*ese t;o '&st be t*e s%'e
J Yo& '%y &se t*e T-Acco&!t Co!cept for SOP#
)e) Assets L%b$tes E4&ty
E>ercses
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C*%pter : Ad0&st'e!ts
Ad6ust,ent
• !%!c%$ report!" t*%t corrects %!y 'st%Kes
'%de pre8o&s$y ! t*e %cco&!t!" perod)
Ad6usting Account
• To b%$%!ce t*e %ssets?$%b$tes %cco&!t to tsproper %'o&!t
• 2 types of %d0&st'e!t :
I) P%y or Rece8e C%s* ! %d8%!ce before
e>pe!se or re8e!&e s reco"!(ed ,@%tc*!"
Pr!cp%$.II) P%y or Rece8e c%s* %fter e>pe!se or re8e!&e
s reco"!(ed
Paid4Receive (#7&R) - Prep%d E>pe!se
- !e%r!ed Re8e!&es
,Rece8e ! %d8%!ce.
Paid4Receive (A7%R) - Accr&ed E>pe!se , e") S%$%ry
P%y%b$e.
-Accr&ed Re8e!&e
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!a,ples:
Prepaid !pense
- reso&rces p%d b&t !ot yet rece8e t*ebe!e+t- A! %sset &!t$ yo& *%8e &sed t ,t&r!s
!to oper%t!" e>pe!se.- E>%'p$e: Prep%d I!s&r%!ce
E") A*'%d %!d Co) p%d R@ for I!s&r%!ce ;*c*
co8ers for / ye%r o! t*e /st of No8e'ber 2/) T*e
Co'p%!y c$oses ts %cco&!t o! t*e /st Dece'ber2/) *%t ;$$ be t*e %d0&st'e!t !eeded
Solutions and !planations:
-O! t*e /st No8e'ber 2/# t*e tr%!s%cto!s !8o$8ed
%re Debt t*e Prep%d I!s&r%!ce %!d Credt C%s* R@ ,%ss&'e t*ey p%y c%s*.
-T*&s# t*e %sset ,Prep%d I!s&r%!ce I!cre%ses by
R@.# %!d C%s* ,decre%ses by R@ .)
-O! t*e / Dece'ber 2/# t*e !s&r%!ce *%s co8ered
t*e +rst t;o 'o!t*s of t*e / Ye%r of co8er%"e , / st No8
2/- /st October 2/3.
-So# t*e co'p%!y ,ust ,a8e so,e ad6ust,ent for
t*e prep%d e>pe!se %s t*e oper%t!" e>pe!se
,I!s&r%!ce E>pe!se. *%s bee! !c&rred)
T*e Ad0&st'e!ts I!8o$8ed %s of / Dece'ber 2/
,?/2. > 2
'o!t*s ,No8 %!d
Dec.
DrI!s&r%!ceE>pe!se 5
Cr
Prep%d
I!s&r%!ce 5
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*nearned Revenues
o @o!ey rece8ed ! %d8%!ce
o Ser8ces to be pro8ded ! t*e
f&t&reo Re8e!&e s e%r!ed ;*e! 0ob s
perfor'edo It s % $%b$ty , &!der C&rre!t
L%b$ty#SOP.
E") O! t*e /st Oct 2/3# Gee
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-Pre8o&s$y %s of /st Oct# t*e $%b$ty s !cre%sed by
R@ 5
-As of /st Dece'ber# t*e Gee
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T*e b%$%!ce of R@/ s
reco"!(ed %s %! e>pe!se
T*ey o;e t*e e'p$oyee R@
/
Accrued Revenue
- Re8e!&e e%r!ed b&t !ot yet p%d
%!d recorded
- %! %sset to t*e co'p%!y
E") O! t*e /st No8 2/3# Z&$ *%s re!ted *s b&$d!" to
%+y Co'e$ Sd! B*d for R@ 2 per 'o!t*) T*e re!ts to be p%d o!ce ! 2 'o!t*s b%ss) !fort&!%te$y# %t
t*e e!d of Dece'ber 2/3# %+y Co'e$ Sd! B*d o!$y
%b$e to p%y *%$f of t*e tot%$ %'o&!t)
So# o! t*e /st Dece'ber# Z&$ ;$$ record t*e fo$$o;!"#
Rece8e c%s*# so c%s*
!cre%ses by R@ / Reco"!(e re8e!&e of R@
/
B&t s!ce %+y Co'e$ o;es Z&$ %!ot*er R@/# Z&$
!eeds to '%Ke so'e %d0&st'e!t)
Re!t o;ed to Z&$ ,%! %sset.Reco"!(ed t*e re8e!&e
Supplies
• Co!s&'%b$e te's t*%t *%8e s*orter $fe
sp%!
• StocKed for rec&rr!" &se
Dr S%$%ry E>pe!se /
Cr S%$%ry P%y%b$e /
Dr C%s* /
Cr Re!t /
Dr Re!t Rece8%b$e /
Cr Re!t /
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• A! %sset to t*e co'p%!y &!t$ t s &sed
,e>pe!se.
E") O! %! /st
2/5# N%c*osLbre p&rc*%sed s&pp$es;ort* R@ 55)
T*e co'p%!y recorded t*e p&rc*%sed s&pp$es ! t*e
%sset %cco&!t &!der t*e !%'e S&pp$es Acco&!tQ) At
t*e e!d of t*e %cco&!t!" perod# %fter co&!t!" t*e
s&pp$es# t*ey fo&!d t*%t s&pp$es %t *%!d ;ort* R@
25) *%t s t*e %'o&!t of s&pp$es e>pe!se !c&rred
%!d 0o&r!%$(e t*e tr%!s%cto!s !8o$8ed) Ass&'e t*ey
p%d by c%s*)
O! %!&%ry /st# t*ey bo&"*t t*e s&pp$es# t*&s t*e
s&pp$es !cre%se by R@ 55 %!d t*er c%s* decre%ses
by R@55 ,p%y by c%s*.
Dr S&pp$es 55
Cr C%s* 55
As of Dece'ber /# t*e b%$%!ce of t*e s&pp$es s R@
25) T*&s t*e e>pe!se !c&rred s# Be"!!!" 1 &sed
B%$%!ce#
sed Be"!!!"
1 B%$%!ce
55 125
sed?E>pe!se
!c&rred e>pe!se of
R@S&pp$y ,%sset. red&ced
by R@
Dr S&pp$y E>pe!se
Cr S&pp$y
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S&pp$es Acco&!t %!/st
P&rc*%se 55
S&pp$yE>pe!se
b%$%!ce c?d 25
55 55
%!/st b%$%!ce b?d 25
S&pp$es
E>pe!se
S&pp$es
!ercises
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Chapter 9: Co,pleting the Accounting Cycle
• Reset t*e temporary %cco&!ts b%$%!ce to (ero• se nco,e Su,,ary to s&''%r(e re8e!&es %!d
e>pe!ses !c&rred• I!co'e S&''%ry St%te'e!t Pro+t Loss
Co'pre*e!s8e I!co'e
Steps nvolved
/. Ide!tfy %cco&!ts for c$os!" 1 te'por%ry %!d per'%!e!t
%cco&!ts
o Te'por%ry %cco&!ts , Zero B%$%!ce %t e!d of perod.
/) Re8e!&es
2) E>pe!ses) D8ded3) I!co'e s&''%ry
o Per'%!e!t Acco&!ts: , to be tr%!sferred to SOP.
/) Assets- c%s*# rece8%b$es# etc2) L%b$tes- p%y%b$es# &!e%r!ed re8e!&es) E4&ty 1 S*%re C%pt%$# D8de!ds %!d etc)
2. Record C$os!" E!tres3 steps:
• C$ose credt b%$%!ce ! re8e!&e to !co'e
s&''%ry
• C$ose debt b%$%!ce ! e>pe!se to !co'e
s&''%ry
• C$ose !co'e s&''%ry to Ret%!ed E%r!!"s
,! SOCE.
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• C$ose D8de!d to Ret%!ed E%r!!"s
/) C$ose credt b%$%!ce ! re8e!&e to !co'e s&''%ry
Dr Re8e!&e >> Cr I!co'e S&''%ry >>
2) C$ose debt b%$%!ce ! e>pe!se to !co'e s&''%ry
Dr I!co'e S&''%ry >> Cr E>pe!ses Acco&!t >>
) C$ose I!co'e S&''%ry , Net I!co'e . to Ret%!ed E%r!!"s
Dr I!co'e S&''%ry >> Cr Ret%!ed E%r!!"s >>
3) C$ose d8de!d to Ret%!ed E%r!!"s
Dr Ret%!ed E%r!!"s >> Cr D8de!d >>
te,s in the State,ent o 7inancial Positons (S&7P) and their
categories
Assets L%b$tes %!d E4&tes
C&rre!t AssetsNo!-c&rre!t Assets
Lo!" ter' !8est'e!t
I!t%!"b$e Assets
C&rre!t L%b$tesNo!-C&rre!t L%b$tes
E4&ty
%er,inologies and !planations
Current Assets &sed# so$d ;t*! o!e ye%r
"oncurrent Assets !ot &sed ;t*! o!e ye%r
Current Liabilities ; ob$"%to!s ,debt. d&e ;t*! o!e ye%r
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"onCurrent Liabilities ( Long ter,) debt d&e !ot ;t*! o!e ye%r
$uities o;!er
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C*%pter 5: @erc*%!ds!"
-erchandise Co,pany %'p$es L%; r'# P$&'b!"Ser8ceNet S%$es-Cost of Goods
So$d
Gross Pro+t Re8e!&es
1 E>pe!ses
Net I!co'e
Net I!co'e
C%$c&$%to!
Re8e!&e- E>pe!se Net
I!co'e
-erchandi1er
-erchandising Co,pany
*o$es%$erCo!s&'er Ret%$er@%!&f%ct&re
r
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nventory Syste,
T*ere %re t;o !8e!tory syste' :
• Perpetual ,tr%!s%cto! co!t!&o&s$y
&pd%ted.
• Periodic , tr%!s%cto! &pd%te %t t*e
e!d of %cco&!t perod.
Co,parisons bet=een Perpetual andPeriodic
S'$%rty: bot* &se !8e!tory %cco&!t %!d cost of
"oods so$d %cco&!t
Dere!ces:
Perpet&%$ Perodc-stocKs &pd%ted
co!t!&o&s$y
-p&rc*%ses drect$y
debted to !8e!tory %!d
p&rc*%se ret&r! credted
to !8e!tory
-S%$es %re recorded ! t;o
0o&r!%$# ) s%$es ) co"s
-stocKs &pd%ted be"! %!d
e!d
-p&rc*%ses %cco&!t#
p&rc*%se ret&r! %!d
%$$o;%!ce &sed *ere
-s%$es recorded o!ce
-re4&res c$os!" e!tres to
&pd%te !8e!tory %!d
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co"s)
Perodc Perpet&%$ To record P&rc*%ses of Goods o!
Credt
P&rc*%ses /2I!8e!tory /2
Acc P%y%b$e /2 Acc P%y%b$e /2
To Record P&rc*%seDco&!t
Acc P%y%b$e /2 Acc P%y%b$e /2
P&rc) Ds 23 I!8e!tory 23 C%s* //76 C%s* //76
To record P&rc*%se Ret&r! %!d A$$o;%!ces
Acc P%y%b$e 25 Acc P%y%b$e 25
P&rc* RA 25 I!8e!tory 25
To record re"*t-I!
E>pe!ses
Tr%!sport ! 7I!8e!tory ,%bsorbscost. 7
c%s* 7 c%s* 7
To Record S%$es o!Credt
AccRece8%b$e 2 Acc Rece8%b$e 2
S%$es 2 S%$es M se$$!" prce 2
COGS M cost prce /5
I!8e!tory ,red&ce %'t. /5
To record S%$es Ret&r! %!dA$$o;%!ces
S%$es RA 7 S%$es RA 7Acc
Rece8%b$e 7 Acc Rece8%b$e ,to red&ce. 7
I!8e!tory , p&t b%cK M cost.5
COGS 5
To record S%$esDsco&!t
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C%s* /552 C%s* /552
S%$es Dsc 39 S%$es Dsc 39Acc
Rece8%b$e /6 Acc Rece8%b$e /6
T*ere %re fe; co!cepts !8o$8ed ! record!" tr%!s%cto! for
bot* syste's)
-%rade 'iscount 1 by '%!&f%ct&rer# ;*o$es%$er to oer better
prce for "re%ter
&%!tty p&rc*%sed
-Purchase 'iscount- red&cto! fro' !8oce prce to
e!co&r%"e e%r$y p%y'e!t
2?/# !?-2 'e%!s t*e of dsco&!t
-/ 'e%!s t*e dsco&!t perod ,e!tt$ed t*e dsco&!t ;t*! /
d%ys.
-! 'e%!s ot*er;se !or'%$ prce ,;t*o&t dsco&!t.- s t*e credt perod
%ransportation Cost and &=nership transer
re"*t o! Bo%rd ,OB. S*pp!"
Po!t
re"*t o! Bo%rd ,OB.
Dest!%to! Po!t
O;!ers*p tr%!sferred to
co&rer
O;!ers*p tr%!sfer to b&yer
B&yer be%rs t*e cost Se$$ers be%r t*e costS%$es occ&rs o!ce "oods
re%c* t*e dest!%to!
S%$es occ&r o!ce t*e "oods
$e%8e t*e s&pp$er
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E>ercses
Chapter > and ? : Receivables @ Long %er, Assets
Receivable
Acco&!t Rece8%b$es -U %'o&!t d&e fro' debtor
-Ud&e to Sales on Credit ,!ot yet p%d. -U%ssets to t*e co'p%!y ,! SOP.
Sales &n Credit
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• C&sto'ers *%8e!%'p$e:
Dr Acc Rece8%b$e /5
Cr S%$es /5
Dr C%s* V
Cr Acc Rece8%b$e V
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O! Apr$ 5t*# To!e E>c$ *%d credt c%rd s%$es of R@ 5) T*e fee
s 5 %!d ts c%s* rece8ed ''ed%te$y o! depost)
Apr$ 5t* #
5>5 R@ 25
,e>pe!se.
Ho;e8er# f t*e c%s* s
!ot rece8ed ''ed%te$y# t*e 0o&r!%$ s*o&$d be $Ke t*s:
To record s%$es ;t*
e>pe!se
To record co$$ecto! o! credtc%rd s%$es
#ad 'ebt-!co$$ectb$e debt ,c&sto'er &!%b$e to p%y.
t is an P"S (in S&PL)
- 2 'et*ods for b%d debt
) Drect rte-O 'et*od
) A$$o;%!ce @et*od'irect Brite& ,ethod
E") O! Apr$ 5t*# @%'&! decded t*%t s*e c%!!ot co$$ect R@
25 debt fro' A*'%d)Dr B%d Debt 25
Cr Acc Rece8%b$e-A*'%d 25
I! c%se of debt reco8ery ,debtor decded to p%y b%cK.# 0&st
re8erse t*e tr%!s%cto!)
To reco8er t*e &!co$$ectb$e debt
to
record c%s* co$$ecto!# c%s*
I!cre%ses
Allo=ance ,ethod
At t*e e!d of %cco&!t!" perod# t s e>pected t*%t tot%$ b%d
debts to be re%$(ed)
-D advantages
Dr C%s* 375
Credt C%rd E>pe!se 25
Cr S%$es 5
Dr Acc Rece8%b$e 375 Credt C%rd E>pe!se 25
Cr S%$es 5
Dr Acc Rece8%b$e 375Cr S%$es 375
Dr) AccRece8%b$e 25Cr B%d Debt 25
DrC%s* 25
Cr AccRece8%b$e 25
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) t records t*e est'%ted b%d debt e>pe!se ! t*e perod
;*e! t*e re$%ted s%$es %re recorded)
) t reports Acco&!t Rece8%b$e o! t*e SOP %t t*e est'%ted
%'o&!t to be co$$ected)
E") It s est'%ted t*%t o&t of R@ 5 of credt s%$es# R@5
s est'%ted to be &!co$$ectb$e) o&r!%$(e)
Dr) B%d Debt E>pe!se 5Cr) A$$o;%!ce for Do&btf&$ Acc
,ADA. 5
A$$o;%!ce for Do&btf&$ %cco&!t s % co!tr%-%sset %cco&!t)
It s &sed !ste%d of red&c!" %cco&!t rece8%b$e drect$y s!ce
t*e co'p%!y do !ot K!o; ;*c* c&sto'er ;$$ !ot be %b$e top%y)
O! t*e St%te'e!t of !%!c%$ Posto! ,SOP. ,%ssets e>tr%ct.
Assets
Acco&!t Rece8%b$e 5
,-. ADA?ADD ,5.
Net Re%$(%b$e 8%$&e /5
Brite o bad debt#
-t*e co'p%!y decded t*%t t c%!!ot co$$ect R@ 25 debt t*%t
A*'%d o;ed to t)
Dr) ADA 25
Cr) Acc Rece8%b$e 25
Acco&!tRece8%b$e
b%$ b?d 25 ADA 25
Recovering a #ad 'ebt
A$$o;%!ce for Do&btf&$Acco&!t
Acc Rec25
#ad 'ebt25
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E") %d*$ *%s decded to p%y *s f&$$ R@ %cco&!t ;*c*
pre8o&s$y ;%s ;rtte! o)
) To re!st%te t*e &!co$$ectb$e#
) To co$$ect t*e c%s*
Dr C%s*
CrAcc
Rece8%b$e
sti,ating #ad 'ebt
D ,ethods %. Perce!t of B%$%!ce of Acc Rece8%b$e
,c?d for ADA.
b. Perce!t of S%$es ,Drect$y B%d Debt
E>pe!se.
E" T*e co'p%!y *%s decded to ;rte o R@/2 of %cco&!t
rece8%b$e) It s est'%ted fro' p%st e>pere!ce t*%t 5 of Acc
Rece8%b$e to be &!co$$ectb$e) T*e b%$%!ce of Acc Rece8%b$e s
R@ 25) B%$%!ce of ADA s 5)
Solution# t s %d8s%b$e to ope! % T- Acco&!t to +!d t*e
est'%ted B%d Debt)
) Dr ADA /2Cr Acc Rece8%b$e /2
) 5 > ,25-/2. 65 b%$%!ce c?d of ADA
) T*e 765 ,/265-5.
Percentage o Sales
Dr Acc Rece8%b$e
Cr B%d Debt
A$$o;%!ce for Do&btf&$Acco&!tAccRece
/2 b?d 5
c?d 65B%dDebt 765
/26
5/26
5
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E") Is t est'%ted t*%t 5 of s%$es to be &!co$$ectb$e) T*e tot%$
s%$es s R@ ) !d t*e B%d Debt E>pe!se)
5 > /5
Dr B%d Debt /5
Cr ADA /5
Aging o Receivable &s&%$$y ;$$ be %sKed ! Ob0ect8e&esto!s
/) C$%ssfy e%c* rece8%b$e %ccord!" to *o; $o!" t s d&e2) @&$tp$y e%c* "ro&p by t*e est'%ted b%d debt
) Tot%$ t*e est'%ted b%d debt for e%c* "ro&p
"otes Receivable
% pro'ssory !ote s % ;rtte! pro'se to p%y %
spec+ed %'o&!t of 'o!ey &s&%$$y ;t* !terest# et*er
o! de'%!d or de+!te f&t&re d%te)
Ho= to calculate the interest Revenue and
Receivable
Principal Annual nterest Rate > %i,e in
7raction o Eear)
E") 6 Notes Rece8%b$e of R@ /# ;%s %ccepted o!October /st 2/3) No !terest *%s bee! rece8ed %!d recorded
%t t*e e!d of t*e %cco&!t!" perod# Dec /st
2/3)I!terest Rece8%b$e Pr!cp%$ =%$&e > A!! R%tes > T'e !
fr%cto! of ye%r
/# > 6 > ,?/2. ,Oct &!t$ Dec.
/5
to be !c$&ded ! SOP
%sset
to be !c$&ded ! SOPL
ot*er oper%t!"re8e!&es
DrI!terestRece8%b$e /5
Cr I!terestRe8e!&e /5
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Long %er, Assets
-E>%'p$es $Ke P$%!t# L%!d# B&$d!"# @otor =e*c$e# E4&p'e!t
%!d etc)
-T%!"b$e ! !%t&re# %ct8e$y &sed ! oper%to!s# %!d be!e+t !
t*e f&t&re
-Dec$!!" ! 8%$&e of %ssets o8er ts &sef&$ $fe)
Land
-!ot deprec%b$e# b&t '%y %pprec%te ,re8%$&ed.
Land ,prove,ent s&c* %s c$e%r!" t*e b&s*es# %!d etc
-;$$ be deprec%ted o8er ts &sef&$ $fe
#uilding
-deprec%b$e
-cost of %c4&sto! !c$&des tt$e fees# %ttor!ey fees %!d etc)
-achinery
-deprec%b$e
-cost !c$&des t*e p&rc*%se prce %!y re$%ted cost to oper%te
t
ntangible Assets
-c%!!ot be see! !or to&c*ed
-ts deprec%to! s c%$$ed a,orti1ation
-e>%'p$es copyr"*t# p%te!t# fr%!c*ses)
'epreciation-t*e process of %$$oc%t!" t*e cost of %! te'# to e>pe!se ! t*e%cco&!t!" perod be!e+t!" fro' ts &se
-S'p$y p&tF 'epreciation is the reduction o the value o
assets over ti,e
it is an P"S in S&PL
7actors in Co,puting 'epreciation-cost
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-resd&%$ 8%$&e
-&sef&$ $fe
'epreciation -ethod
-Str%"*t $!e 'et*od ,'ost co''o!.
-Dec$!!" B%$%!ce 'et*od ,'ost co''o!.
-!ts-of-prod&cto! ,co''o! s @C.
G8e!#
Cost /#Resd&%$ =%$&e
Deprec%b$e =%$&e 7
sef&$ $fe
Ye%rs 5-ye%rs
!t #
%. Str%"*t L!e @et*od
R@ /3? ye%r
b. Dec$!!" B%$%!ce @et*od
R@ 2/5 ? ye%r
/# - 5 ye%rs
Cost - Resd&%$=%$&e sef&$
Ye%rs
Dr Dep E>pe!se /3
Cr Acc&'&$%tedDep /3
/# -/3
3
Cost- Acc&'&$%ted Dep
sef&$ Lfe
Dr Dep E>pe!se 2/5
Cr Acc&'&$%tedDep 2/5
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*nitsoProduction -ethod
,/#-.?,#.
)2
Cost per &!t > N&'ber of &!ts prod&ced ! % perod
)2 > 6# R@ /2 ? ye%r Dr Dep) E>pe!se
/2
Cr)
Acc&'&$%ted) Dep /2
'isposals o PlantF PropertyF $uip,ent
/)Co'p%res# Cash
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red&ce.
G%! o! Dspos%$
,Re8e. /
C%s* =S NB=V U , /#-2.
G%! o! Dspos%$ of R@ /
E>ercses