completing the accounting cycle app4
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Completing the Accounting CycleTRANSCRIPT
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall.
Chapter 4
1
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Understand reversing entries (see Appendix 4A, located at myaccountinglab.com)
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Special journal entriesEase the burden of accounting for transactions in a later periodAre the exact opposites of certain end-of -period adjustmentsUsed with accrual-type adjustmentsNot required by GAAP
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Typical journal entry at the end of a period
After posting, the accounts are updated
Typical journal entry at the end of a period
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Normal adjusting entry to accrue Salary payable
The reversing entry just reverses the debit and the credit and is dated the first day of the new period
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Notice that Salary expense account contains the$900 adjustment, but it is a credit in the account
The credit balance is eliminated on June 1, when it pays the payroll and debits Salary expense
This cash payment entry is posted as follows:
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Refer to the data in Problem 4-32B.1. Open accounts for Salary payable and Salary expense. Insert
their unadjusted balances at January 31, 2012.2. Journalize adjusting entry (e) and the closing entry for Salary
expense at January 31. Post to the accounts.3. On February 5, Leopard Anvils, Inc. paid the next payroll
amount of $600. This payment included the accrued amount at January 31, plus $100 for the first few days of February. Journalize this cash payment, and post to the accounts. Show the balance in each account.
4. Using a reversing entry, repeat Requirements 1–3. Compare the balances of Salary payable and Salary expense after using a reversing entry with those balances computed without the reversing entry (as they appear in your answer to Requirement 3).
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Salary payable Salary expense
Oct 31 0 Oct 31 2,500
Requirement 1:
Unadjusted balance at the end of October 31, 2012
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Journal
DATEACCOUNTS AND EXPLANATIONS
POST.REF. DEBIT CREDIT
Oct Adjusting Entrye. 31 Salary expense 200
Salary payable 200
Closing Entry31 Income summary 2,700
Salary expense 2,700
Requirement 2:At the end of month adjusting and journal entries:
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Salary payable Salary expense
Oct 31 0 Oct 31 2,500 Clo 2,700
Adj 200 Adj (e) 200
Bal 200 Bal 0
Adjusting and closing entries
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Journal
DATEACCOUNTS AND EXPLANATIONS
POST.REF. DEBIT CREDIT
Cash payment entryNov 5 Salary payable 200
Salary expense 700Cash 900
Requirement 3
The following month, November, 2012:
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Cash Salary payable Nov 5 900 Nov 5 200 Nov 1 200
Bal 0
Salary expense
Nov 1 0
Nov 5 700
Bal 700
Cash payment for salary expense:
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Journal
DATEACCOUNTS AND EXPLANATIONS
POST.REF. DEBIT CREDIT
Oct. Adjusting Entrye. 31 Salary expense 200
Salary payable 200
Closing Entry31 Income summary 2,700
Salary expense 2,700
Nov. 1 Salary payable 200 Salary expense 200
5 Salary expense 900 Cash 900
Requirement 4 Situation: Using Reversing entry, repeat Req. 1 - 3
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Salary payable Salary expenseOct 31 200 Oct 31 2,500 Clo 2,700
Nov 1 Rev.
200 Adj (e) 200
Bal 0 Nov 5 900 Nov1Rev. 200
Bal 700
Requirement
The balance of the Salary payable account after using a reversing entry is the same as the balance computed without the reversing entry (as it appears in the answer to requirement 3). The balance of the Salary expense account after using a reversing entry is the same as the balance computed without the reversing entry (as it appears in the answer to Requirement 3).
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Reversing entries are special journal entries that ease the burden of accounting for transactions in a later period. Reversing entries are the exact opposites of certain adjusting entries at the end of the prior period. Reversing entries are used most often in conjunction with accrual-type adjustments, such as accrued salary expense and accrued service revenue.
15
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Copyright
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