Week 14:Revision

Adjusting entries, financial statements

ABC Trading: Unadjusted Trial Balance as at 30 April 2012Dr (RM)Cr (RM)Cash22,100Accounts receivable3,850Provision for doubtful debt (1 May 2011)200Opening stock (1 May 2011)2,200Prepaid rent4,800Prepaid insurance1,800Equipment14,500Provision for depreciation equipment1,000Accounts payable800Capital30,950Drawing5,000Purchases and Sales2,10020,950Fees received5,000Salary1,500Carriage inwards200Carriage outwards250Purchases return500Sales return950Discounts allowed200Discounts received5059,45059,450

Adjusting entries, financial statementsThe following data as at 30 April 2012: Insurance has expired by RM300. Closing stock/inventory is RM 1,350. Depreciation for equipment is 10% by using reducing balance method. Accounts receivable included a bad debt of RM450.Provision for doubtful debt as at year end will be 10% of accounts receivable. Accrued salary is RM 120. Rent has expired by RM 1,600. Unearned fees are RM 2,500. No entry had been made in the books of account for a cheque received from a debtor on 15 April 2012 made payable to ABC Trading for RM100. Stock withdrawn for personal use during the year was estimated to be RM200.

Adjusting entries, financial statementsPrepare journal entry for each of the adjustments.

Insurance has expired by RM300.

Dr Insurance300CrPrepaid insurance300Expiry of insurance.

Stock is RM 1,350.

Dr Closing stock (Balance Sheet) 1,350Cr Closing stock (Income Statement) 1,350Closing stock as at 30 April 2012.

Adjusting entries, financial statementsDepreciation for equipment is 10% by using reducing balance method.

10% x (14,500 Cost 1,000 Acc.Depn.) = 1,350

DrDepreciation expense1,350Cr Accumulated depreciation1,350Depreciation charge for the year.

Adjusting entries, financial statementsAccounts receivable included a bad debt of RM450.

DrBad debts (expense) 450Cr Accounts receivable450Bad debts written off

Adjusting entries, financial statementsProvision for doubtful debt at year end will be 10% of debtors.

10% x Debtors 3,300 (3,850 450 100) = 330Provision for doubtful debts b/f = 200Hence, provision of 130 (330 200) needs to be added.

DrProvision for doubtful debts (expense) 130Cr Provision for doubtful debts 130Additional provision for doubtful debts.

Adjusting entries, financial statementsAccrued salary is RM 120.

DrSalary120Cr Accrued salary120Accrual of salary.

Rent expired during April is RM 1,600.

DrRent 1,600Cr Prepaid rent 1,600Expiry of rent.

Adjusting entries, financial statementsUnearned fees are RM 2,500.

DrFees received 2,500Cr Unearned fees 2,500Unearned fees as at 30 April 2012.

No entry had been made in the books of account for a cheque received from a debtor on 15 April 2012 made payable to ABC Trading for RM100.

Dr Cash at bank100Cr Accounts receivables100Correction of wrong entry.

Adjusting entries, financial statementsStock withdrawn for personal use during the year was estimated to be RM200.

DrDrawings200Cr Purchases200Drawings of stocks.

Adjusted trial balance

ABC Trading: Trial Balance as at 30 April 2012Unadjusted Adjustments AdjustedDrCrDrCrDrCrCash 22,100 100 22,200 Accounts receivable3,850 550 3,300 Provision for doubtful debts 200 130 330 Opening stock 2,200 2,200 Prepaid rent 4,800 1,600 3,200 Prepaid insurance1,800 300 1,500 Equipment 14,500 14,500 Acc. depreciation equipment 1,000 1,350 2,350 Accounts payable800 800 Capital 30,950 30,950 Drawing 5,000 200 5,200 Purchases2,100 200 1,900 Sales20,950 20,950 Fees received5,000 2,500 2,500

Adjusted trial balance

ABC Trading: Trial Balance as at 30 April 2012Unadjusted Adjustments AdjustedDrCrDrCrDrCrSalary1,500 120 1,620 Bad debts 450 450 Carriage inwards 200 200 Carriage outwards250 250 Purchases return500 500 Sales return 950 950 Discounts allowed200 200 Discounts received50 50 Insurance 300 300 Closing stock (Balance Sheet) 0 1,350 1,350 Closing stock (Income Statement) 0 1,350 1,350 Depreciation expense 1,350 1,350 Provision for doubtful debt 0 130 130 Accrued salary 0 120 120 Rent 0 1,600 1,600 Unearned fees 0 2,500 2,500 59,45059,4508,1008,10062,40062,400

Adjusting entries, financial statementsPrepare an income statement for the year ended 30 April 2012. (Income statement = trading profit and loss account)

ABC TradingIncome Statement for the year ended 30 April 2012

Sales 20,950Less: Sales return(950)20,000Less: cost of goods soldOpening stock2,200Purchases1,900Less: Purchase returns(500)Add: Carriage inwards2001,600Less: Closing stock(1,350)COGS2,450Gross profit17,550

Adjusting entries, financial statements

ABC TradingIncome Statement for the year ended 30 April 2012Add: Other RevenueFees received2,500Discounts received502,550 20,100Less: ExpensesSalary1,620Bad debts450Provision for doubtful debts130Carriage outwards250Discounts allowed200Insurance300Depreciation expense1,350Rent1,6005,900Net profit14,200

Adjusting entries, financial statementsPrepare a balance sheet as at 30 April 2012. (Balance sheet = Statement of Financial Position)

ABC Trading: Balance Sheet as at 30 April 2012RMRMRMFixed assets Equipment14,500Provision for depreciation equipment(2,350)12,150Current assets Cash22,200Accounts receivable3,300Provision for doubtful debts(330)2,970Stock1,350Prepaid rent3,200Prepaid insurance1,50031,220

Adjusting entries, financial statements

ABC Trading: Balance Sheet as at 30 April 2012 RMRMRMCurrent assets 31,220

Current liabilitiesAccounts payable800Accrued salary120Unearned fees2,500(3,420)27,80039,950Owners equityCapital30,950Drawing(5,200)Add: Net profit14,20039,950