principal of accounting-1
TRANSCRIPT
-
8/9/2019 Principal of Accounting-1
1/34
PRESENTATION
TOPIC:-
Adjusting Entries, IncomeStatement and Balance sheet.
-
8/9/2019 Principal of Accounting-1
2/34
-
8/9/2019 Principal of Accounting-1
3/34
Entries made at the end of the accounting period
for the purpose of recognizing revenue and the
expenses that are not properly measured as a
result of generating transaction as they occur.
-
8/9/2019 Principal of Accounting-1
4/34
Accounting period is of one year duration inwhich accounting activities are performed.e.g. 1stJan to 31st Dec.
Revenue is an income that a company receivesfrom its business activities, usually from thesale of goods and services to the customers.
Expenses are the costs of goods and services
used up in the process of
earning revenue.
-
8/9/2019 Principal of Accounting-1
5/34
What is the main purpose of adjusting entries?
The main purpose of adjusting entries is to:
a. Record transactions and events.b. Recognize assets purchased during theperiod.
c. Recognize debts paid during the period.d. Correct errors.
-
8/9/2019 Principal of Accounting-1
6/34
For Merchandise Inventory:-
Merchandise inventory (Debit)
Income summary account (Credit)
For Bad debt Expense:-Bad debt expense (Debit)
Allowance for bad debt (Credit)
For Depreciation Expense:-
Depreciation expense (Debit)
Allowance for depreciation (Credit)
-
8/9/2019 Principal of Accounting-1
7/34
Accrued Expense:-
Salary, insurance, rent expense (Debit)
Salary, Insurance, rent payable (Credit)Accrued Income:-
Salary, commission, rent receivable(Debit)
Salary, commission, rent income (Credit)
-
8/9/2019 Principal of Accounting-1
8/34
Accrued Income:- Here the word accruedmeans income which is earned but not yetreceived.
Accrued Expense:- Here the word accruedmeans expense which has not yet been paid.
-
8/9/2019 Principal of Accounting-1
9/34
The expenses which have been incurred butnot yet been paid.
Situations:- (salary, rent, insurance)Salary payable
Salary not yet paid
Unpaid salary
Accrued salary expense
Outstanding salary expense
-
8/9/2019 Principal of Accounting-1
10/34
The income which has earned but not yetreceived.
Situations:- (salary, rent, commission)Commission income receivable
Commission earned but not yet received
Accrued commission income
Outstanding commission
income
-
8/9/2019 Principal of Accounting-1
11/34
Adjustment data:-
Merchandise inventory Dec 31, 2009 Rs.300
-
8/9/2019 Principal of Accounting-1
12/34
-
8/9/2019 Principal of Accounting-1
13/34
-
8/9/2019 Principal of Accounting-1
14/34
-
8/9/2019 Principal of Accounting-1
15/34
Is referred as profit and loss statement(P&L), earnings statement, operatingstatement or statement of operations.
An income statement is afinancial statement that measures acompany's financial performance over a
specific accounting period
-
8/9/2019 Principal of Accounting-1
16/34
Financial statement:- Records that shows thefinancial operations and performance of abusiness.
-
8/9/2019 Principal of Accounting-1
17/34
What is the main purpose of using income
statement?
The main purpose of income statement is to:
An income statement shows you both the income
and the expenses of a company. It allows you to
judge whether the company is spending too much
on particular expenses, or is making profit.
-
8/9/2019 Principal of Accounting-1
18/34
Sales sales discount sales return = Net sales
(60,000 1,200 500 = 58,300 )
Purchase purchase discount purchase return= gross purchase
(9,500 3,700 4,500 = 1,300 )
Gross purchase + transportation = Net purchase
(1,300 + 500 = 1,800)
-
8/9/2019 Principal of Accounting-1
19/34
Net purchase + Opening merchandise inventory= cost of good sold available for sale
(1,800 + 23,000 = 24,800)
Cost of good sold available for sale closingmerchandise inventory = cost of good sold
(24,800 17,000 = 7,800)
-
8/9/2019 Principal of Accounting-1
20/34
Net sales cost of good sold = gross profit/loss
(58,300 7,800 = 50,500)
Gross profit/loss expenses = operating income
(50,500 3,000 = 47,500)
Operating income + other income = Net income(47,500 + 1,000 = 48,500)
-
8/9/2019 Principal of Accounting-1
21/34
Sales 60,000
Sales discount 1,200
Sales return 500Net sale?
-
8/9/2019 Principal of Accounting-1
22/34
-
8/9/2019 Principal of Accounting-1
23/34
-
8/9/2019 Principal of Accounting-1
24/34
-
8/9/2019 Principal of Accounting-1
25/34
-
8/9/2019 Principal of Accounting-1
26/34
Balance sheet has three parts: assets, liabilities
and ownership equity. The balance sheet
presents a company's financial position atthe end of a specified date.
-
8/9/2019 Principal of Accounting-1
27/34
Assets are economic resources that are used to
run the business.
Liability is an obligation that legally binds anIndividual or company to settle a debt.
Owner equity is the total assets minus total
liabilities of an individual or company. For a
company, also called net worth.
-
8/9/2019 Principal of Accounting-1
28/34
The primary purpose of the balance sheet
Report the financial position of the reportingentity at a particular point oftime.
Determine cash flow for the period
Report the difference between cash inflows
and cash outflows.
-
8/9/2019 Principal of Accounting-1
29/34
Capital + net profit drawing = owners equity
(40,500 + 700 500 = 40,700 )
Capital net loss drawing = owners equity
(40,500 - 700 500 = 39,300)
-
8/9/2019 Principal of Accounting-1
30/34
-
8/9/2019 Principal of Accounting-1
31/34
-
8/9/2019 Principal of Accounting-1
32/34
-
8/9/2019 Principal of Accounting-1
33/34
-
8/9/2019 Principal of Accounting-1
34/34