3
The Adjusting Process
Accounting Using Excel for Success
Student Version
PowerPoint Presentation by:
Douglas Cloud, Professor Emeritus Accounting, Pepperdine University
© 2011 Cengage Learning.
All Rights Reserved. May not be copied, scanned,
or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain
product or service or otherwise on a passwordprotected website for classroom use.
1
1
Describe the nature of
the adjusting process.
3-2
1-2
2
1
Types of Accounts
Requiring Adjustment
Prepaid expenses are the
advance payment of future
expenses and are recorded as
assets when cash is paid.
3-3
1-3
3
1
Types of Accounts
Requiring Adjustment
Unearned revenues are the
advance receipt of future
revenues and are recorded
as liabilities when cash is
received.
3-4
1-4
4
1
Types of Accounts
Requiring Adjustment
Accrued revenues are unrecorded
revenues that have been earned
and for which cash has yet to be
received.
3-5
1-5
5
1
Types of Accounts
Requiring Adjustment
Accrued expenses are unrecorded
expenses that have been incurred
and for which cash has not been
paid.
3-6
1-6
6
2
Journalize entries for
accounts requiring
adjustment.
3-7
3-7
1-7
7
2
Prepaid Expenses
NetSolutions’ Supplies account has a balance of
$2,000 in the unadjusted trial balance. Some of
these supplies have been used. On December 31,
a count reveals that $760 of supplies are on hand.
Supplies (balance on trial balance) $2,000
Supplies on hand, December 31
– 760
Supplies used
$1,240
3-8
1-8
8
2
Supplies
Bal.
3-9
1-9
2,000 Dec. 31
760
14
Supplies Expense
1,240 Bal.
Dec. 31
55
800
1,240
2,040
9
2
Prepaid Expenses
The debit balance of $2,400 in
NetSolutions’ Prepaid
Insurance account represents
the December 1 prepayment of
insurance for 12 months.
3-10
1-10
10
2
Prepaid Insurance
Bal.
2,400 Dec. 31
2,200
3-11
1-11
15
200
Insurance Expense
Dec. 31 200
56
11
2
Unearned Revenues
The December 31 unadjusted
trial balance of NetSolutions
indicates a balance in the
unearned rent account of $360.
3-12
1-12
12
2
Unearned Rent
Dec. 31
120 Bal.
3-13
1-13
23
360
Rent Revenue
42
13
2
Unearned Rent
Dec. 31
120 Bal.
Bal.
3-14
1-14
23
360
240
Rent Revenue
Dec. 31
42
120
14
2
Accrued Revenues
NetSolutions signed an agreement with
Danker Co. on December 15 to
provide services at $20 per hour. As of
December 31, NetSolutions had
provided 25 hours of assistance.
3-15
1-15
15
2
Accounts Receivable 12
Bal.
2,220
Dec. 31
500
Bal.
2,720
3-16
1-16
Fees Earned
Bal.
41
16,340
16
2
Accounts Receivable 12
Bal.
2,220
Dec. 31
500
Bal.
2,720
3-17
1-17
Fees Earned
Bal.
Dec. 31
Bal.
41
16,340
500
16,840
17
2
Accrued Expenses
NetSolutions pays it employees biweekly.
During December, NetSolutions paid wages of
$950 on December 13 and $1,200 on December
27. As of December 31, NetSolutions owes
$250 of wages to employees for Monday and
Tuesday.
3-18
1-18
18
2
Wages Payable
3-19
1-19
22
Wages Expense
Bal.
4,275
Dec. 31
250
Bal.
4,525
51
19
2
Wages Payable
Dec. 31
3-20
1-20
22
250
Wages Expense
Bal.
4,275
Dec. 31
250
Bal.
4,525
51
20
2
The journal entry for the payment of wages
on January 10 is shown below.
After
posting
3-21
1-21
21
2
NetSolutions estimates the
depreciation on its office
equipment to be $50 for
the month of December.
3-22
1-22
22
2
Depreciation Expense
Dec. 31
50
3-23
1-23
53
Accum. Depr.—Office Equip. 19
23
2
Depreciation Expense
Dec. 31
50
3-24
1-24
53
Accum. Depr.—Office Equip. 19
Dec. 31
50
24
2
NetSolutions’ balance sheet would
show office equipment at cost, less
accumulated depreciation.
Office equipment $1,800
Less accumulated
depreciation
50 $1,750
Book
value
3-25
1-25
25
3
Summarize the
adjustment process.
3-26
1-26
26
3
Exhibit 7
3-27
1-27
Adjusting Entries—NetSolutions
(continued)
27
3
Exhibit 7
Adjusting Entries—NetSolutions (continued)
.
3-28
1-28
28
4
Prepare an adjusted
trial balance.
3-29
1-29
29
4
Exhibit 9
3-30
1-30
Adjusted Trial Balance—NetSolutions
30
3-31
1-31
31