《会计英语》课程教学课件（PPT讲稿）Unit 05 Completion of the Accounting Cycle

Unit 5 Completion of theAccounting CycleI.AdjustingEntriesII.Closing EntriesII.Adjusted Trial Balance

Unit 5 Completion of the Accounting Cycle Ⅰ. Adjusting Entries Ⅱ. Closing Entries Ⅲ. Adjusted Trial Balance

Accounting Cycle1.Analyzingtransactions7.Financial2.MakingstatementjournalsAccountingCycle3.Preparing6.Adjustedledgerstrial balance4.Trial5.Adjusting&closingbalance2

2 1.Analyzing transactions Accounting Cycle 2.Making journals 3.Preparing ledgers 4.Trial balance 5.Adjusting &closing 6.Adjusted trial balance 7.Financial statement Accounting Cycle

I.AdjustingEntriesAdjusting entries arejournal entries whichareclassified as either prepayments or accrualsAdjusting entries are needed because they assignrevenues to the period when they are earned andexpenses to the period when they are incurred.With adjusting entries, related asset and liabilityaccounts balances are corrected under the conceptofaccrual-basis3

3 Ⅰ. Adjusting Entries ⚫ Adjusting entries are journal entries which are classified as either prepayments or accruals. ⚫ Adjusting entries are needed because they assign revenues to the period when they are earned and expenses to the period when they are incurred. ⚫ With adjusting entries, related asset and liability accounts balances are corrected under the concept of accrual-basis

Adjustment·PrepaymentsAccrualsPrepaid expensesAccruedrevenuesUnearned revenuesAccrued expenses

4 •Prepayments Prepaid expenses Unearned revenues Adjustment Accrued revenues Accrued expenses ⚫ Accruals

1.Prepayments:Prepaid expenses: expenses paidin cash and recorded inassets before they are used or consumed.Unearned revenues: cash received as liabilities beforerevenue is earned.2.Accruals:Accrued revenues: revenues earned but not yet received incash or recorded.Accrued expenses: expenses incurred but not yet paid incash or recorded.5

5 1.Prepayments: Prepaid expenses: expenses paid in cash and recorded in assets before they are used or consumed. Unearned revenues: cash received as liabilities before revenue is earned. 2.Accruals: Accrued revenues: revenues earned but not yet received in cash or recorded. Accrued expenses: expenses incurred but not yet paid in cash or recorded

Accounts beforeType of adjustmentAdjusting entryadjustmentAsset overstatedPrepaid expensesDr. ExpensesCr. AssetsExpenses understatedUnearned revenuesLiabilities overstatedDr. LiabilitiesCr. RevenuesRevenues understatedAccrued revenuesAssets understatedDr. AssetsRevenues understatedCr.RevenuesAccrued expensesDr.ExpensesExpenses understatedLiabilities understatedCr. Liabilities6

6 Type of adjustment Accounts before adjustment Adjusting entry Prepaid expenses Asset overstated Expenses understated Dr. Expenses Cr. Assets Unearned revenues Liabilities overstated Revenues understated Dr. Liabilities Cr. Revenues Accrued revenues Assets understated Revenues understated Dr. Assets Cr. Revenues Accrued expenses Expenses understated Liabilities understated Dr. Expenses Cr. Liabilities

1.PrepaidExpensesPayments of expenses that will benefit more thanone accounting period are called prepaid expensesCommon prepayments are insurance, taxes, rents,anddepreciation,etc

7 1. Prepaid Expenses ⚫ Payments of expenses that will benefit more than one accounting period are called prepaid expenses. ⚫ Common prepayments are insurance, taxes, rents, and depreciation, etc

Whenexpenses arepaidAn asset account is increased to show thebenefit that will be received in the futureAttheend of eachaccounting periodApportion is needed to record the expensesthat occurred in the current period8

8 ⚫ An asset account is increased to show the benefit that will be received in the future When expenses are paid At the end of each accounting period ⚫ Apportion is needed to record the expenses that occurred in the current period

Adjustmentforprepaid expensesAssetsExpensesOverstatedAdjustingAdjustingBalanceEntry(-)Entry(+)9

9 Adjustment for prepaid expenses Assets Expenses Overstated Balance Adjusting Entry(-) Adjusting Entry(+)

Example(1)PrepaidInsuranceTarget paid a $1,200 for a 3-month insuranceWhenexpenses arepaid1,200Dr.PrepaidInsuranceCr. Cash1,200Attheendofthemonth400Dr.Insurance Expense400Cr.PrepaidInsuranceassets = liabilitie s +owner'seguity10

10 Example(1) Prepaid Insurance ⚫ Target paid a $1,200 for a 3-month insurance. assets = liabilitie s + owner'sequity Dr. Prepaid Insurance 1,200 Cr. Cash 1,200 When expenses are paid At the end of the month Dr. Insurance Expense 400 Cr. Prepaid Insurance 400