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Week 14:

Revision

Adjusting entries, financial


statements
ABC Trading: Unadjusted Trial Balance as at 30 April
2012
Cash
Accounts receivable
Provision for doubtful debt (1 May
2011)
Opening stock (1 May 2011)
Prepaid rent
Prepaid insurance
Equipment
Provision for depreciation
equipment
Accounts payable
Capital
Drawing
Purchases and Sales
Fees received
Salary
Carriage inwards
Carriage outwards
Purchases return
Sales return
Discounts allowed

Dr (RM)
22,100
3,850

Cr (RM)
200

2,200
4,800
1,800
14,500
1,000
800
30,950
5,000
2,100

20,950
5,000

1,500
200
250
500
950
200

Adjusting entries, financial


statements

The 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Stock withdrawn for personal use during the year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


statements
Prepare journal entry for each of the adjustments.
Insurance has expired by RM300.
Dr
Insurance
Cr
Prepaid insurance
Expiry of insurance.

300
300

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

Adjusting entries, financial


statements
Depreciation for equipment is 10% by using
reducing balance method.
10% x (14,500 Cost 1,000 Acc.Depn.) = 1,350
Dr
Depreciation expense
Cr
Accumulated depreciation
Depreciation charge for the year.

1,350
1,350

Adjusting entries, financial


statements
Accounts receivable included a bad debt of
RM450.
Dr
Bad debts (expense)
Cr
Accounts receivable
Bad debts written of

450
450

Adjusting entries, financial


statements
Provision for doubtful debt at year end will be 10% of
debtors.
10% x Debtors 3,300 (3,850 450 100) = 330
Provision for doubtful debts b/f = 200
Hence, provision of 130 (330 200) needs to be
added.
Dr
Provision for doubtful debts (expense)
Cr
Provision for doubtful debts
Additional provision for doubtful debts.

130
130

Adjusting entries, financial


statements
Accrued salary is RM 120.
Dr
Salary
Cr
Accrued salary
120
Accrual of salary.

120

Rent expired during April is RM 1,600.


Dr
Rent
Cr
Prepaid rent
Expiry of rent.

1,600
1,600

Adjusting entries, financial


statements
Unearned fees are RM 2,500.
Dr
Fees received
Cr
Unearned fees
Unearned fees as at 30 April 2012.

2,500
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.
Dr
Cash at bank
Cr
Accounts receivables
Correction of wrong entry.

100
100

Adjusting entries, financial


statements
Stock withdrawn for personal use during the year
was estimated to be RM200.
Dr
Drawings
Cr
Purchases
Drawings of stocks.

200
200

Adjusted trial balance


ABC Trading: Trial Balance as at 30 April 2012

Unadjusted
Adjustments
Adjusted

Dr
Cr
Dr
Cr
Dr
Cr
Cash
22,100

100
22,200

Accounts receivable
3,850

550 3,300

Provision for

200
130

330
doubtful debts
Opening stock
2,200

2,200

Prepaid rent
4,800

1,600 3,200

Prepaid insurance
1,800

300 1,500

Equipment
14,500

14,500

Acc. depreciation

1,000
1,350
2,350
equipment
Accounts payable

800

800
Capital
30,950

30,950
Drawing
5,000

200
5,200

Purchases
2,100

200 1,900

Sales
20,950

20,950
Fees received

5,000 2,500

2,500

Adjusted trial balance


ABC Trading: Trial Balance as at 30 April
2012

Unadjusted
Adjustments Adjusted

Dr
Cr
Dr
Cr
Dr
Cr
Salary
1,500

120
1,620

Bad debts

450

450

Carriage inwards
200

200

Carriage outwards
250

250

Purchases return

500

500
Sales return
950

950

Discounts allowed
200

200

Discounts received

50

50
Insurance

300

300

Closing stock (Balance


0
1,350
1,350

Sheet)
Closing stock (Income

0
1,350
1,350
Statement)
Depreciation expense

1,350
1,350

Provision for doubtful


0

130

130

debt
Accrued salary

0
120

120
Rent
0
1,600
1,600

Unearned fees

0
2,500
2,500

59,450 59,450 8,100 8,100 62,40 62,40

Adjusting entries, financial


statements

Prepare an income statement for the year ended 30 April


2012. (Income statement = trading profit and loss
account)
ABC Trading
Income Statement for the year ended 30 April 2012
Sales

20,95
0
(950)
20,00
0

Less: Sales return


Less: cost of goods sold
Opening stock
Purchases
Less: Purchase returns
Add: Carriage inwards
Less: Closing stock
COGS

2,200
1,900
(500)
200 1,600
(1,350
)
2,450

Adjusting entries, financial


statements

ABC Trading
Income Statement for the year ended 30 April 2012
Add: Other Revenue
Fees received
2,500
Discounts received
50
2,550
20,100
Less: Expenses
Salary
1,620
Bad debts
450
Provision for doubtful debts
130
Carriage outwards
250
Discounts allowed
200
Insurance
300
Depreciation expense
1,35
0
Rent
1,600
5,900
Net profit
14,200

Adjusting entries, financial


statements

Prepare a balance sheet as at 30 April 2012.


(Balance sheet = Statement of Financial Position)
ABC Trading: Balance Sheet as at 30 April 2012
RM
RM
RM
Fixed assets
Equipment
14,500
Provision for depreciation
(2,350)
equipment
12,150
Current assets
Cash
22,200
Accounts receivable
3,300
Provision for doubtful debts
(330) 2,970
Stock
1,350
Prepaid rent
3,200
Prepaid insurance
1,500
31,220

Adjusting entries, financial


statements

ABC Trading: Balance Sheet as at 30 April


2012
RM
RM
RM
Current assets
31,220
Current
liabilities
Accounts payable
Accrued salary
Unearned fees

800
120
2,50
0

(3,420
)
27,800
39,950

Owners equity
Capital
Drawing

30,950
(5,200)