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Unit 11-Adjusting the Books

Unit 11-Adjusting the Books. Accounting 30S I Miss Schewczyk. Purpose: Adjusting the Books. Employees work overtime or earn bonuses Changes have not been recorded by the end of the fiscal period. Adjusting the Books.

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Unit 11-Adjusting the Books

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  1. Unit 11-Adjusting the Books Accounting 30S I Miss Schewczyk

  2. Purpose: Adjusting the Books • Employees work overtime or earn bonuses • Changes have not been recorded by the end of the fiscal period

  3. Adjusting the Books • An adjusting entry is recorded at the end of the accounting period to bring an asset or liability account and revenue or expense balance to its proper amount.

  4. Prepaid Expenses • Items paid for in advance of receiving their benefits • Office supplies-current assets-unused • When used-no longer assets-change to expense

  5. Prepaid Expenses • Entries are made to record the conversion of prepaid assets to expenses • To correct account balances for the balance sheet and to record the appropriate expense for the period on the income statement • These entries=adjusting entries

  6. Prepaid Rent • Rental lease: • Rent of $1700 a month • Must be paid in advance for three months • April 1: cheque for $5100 is issued in payment of April, May and June rent. June April May

  7. Prepaid Rent • Rent Expense is not debited • Prepaid Rent is debited

  8. Prepaid Rent • End of April: • Should Prepaid Rent be shown as a current asset with a value of $5100?

  9. Prepaid Rent • After one month: $1700 of asset Prepaid Rent has been used • Value of prepaid rent must be reduced ($5100-1700=$3400) $1700 $1700 $1700 June April May

  10. Prepaid Rent • Value of prepaid rent must be reduced ($5100-1700=$3400) • $1700 rent used record expense • Adjusting entry

  11. Prepaid Rent • Adjusting entry Apr.30 Rent Expense 1700 Prepaid Expense 1700 To record one month’s Rent Expense.

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