Tricia C.
Ascan
Lecturer
Why do we need to adjust at the end of
the accounting period?
Certain items in the accounting records have to be
updated to reflect the actual amount for a particular
period.
Example:
Supplies bought may not be all used up. We have to
reflect the actual amount of the supplies that were
used up and the amount that is still in the inventory.
This would mean part of the original amount will be
reported as expense (the used up portion) and part
will be reported as asset (the unused portion).
From the example Rowena’s Laundry Shop, the following
accounts should be adjusted..
Supplies used for the month amounted to
Php1,200
Electric bill was received covering the month of
March amounting to Php1,800. This has not yet
been recorded in the books.
A total of Php2,200 laundry services were not yet
collected.
The laundry equipment has a useful life of 4 years.
Depreciation for the month should be recorded.
For the first adjustment…..
On March 5, laundry supplies bought were Php8,000.
On March 31
Php6,800 (still unused)
Laundry Supplies
(Php8,000)
Php1,200 (used)
The used supplies should be
recorded as an expense. This will
increase the expense account and
reduces the asset account.
Adjusting Journal Entry:
GENERAL JOURNAL
DATE ACCOUNT TITLE DEBIT CREDIT
Adjusting Entries:
March 31 Supplies Used 1,200.00
Supplies 1,200.00
To adjust supplies that were used
up during the period
For the second adjustment…..
Electric bill for the month of March worth Php1,800.
It should be included as expense for the month of
March.
This is an example of accrued expense – an expense
already incurred but not yet paid.
It creates an expense as well as a liability account.
Adjusting Journal Entry:
GENERAL JOURNAL
DATE ACCOUNT TITLE DEBIT CREDIT
Adjusting Entry:
March 31 Utilities expense 1,800
Utilities payable 1,800
To record accrued utilities.
For the third adjustment…..
A total of Php2,200 laundry services were not yet
collected.
While not yet collected, this should be included as part
of the revenues for the month of March.
This is an example of accrued income – income already
earned but not yet received.
It creates an account receivable and increases the
revenue account.
Adjusting Journal Entry:
GENERAL JOURNAL
DATE ACCOUNT TITLE DEBIT CREDIT
Adjusting Entry:
March 31 Accounts receivable 2,200
Service revenue 2,200
To record accrued laundry services.
For the last adjustment…..
To compute for the annual depreciation:
Cost of the asset - salvage value
Useful life of the asset
= 150,000 - 0 = Php 37,500
4years
However, since we only have 1 month to adjust,
we need to compute the monthly depreciation:
= Annual depreciation
12 months
= 37,500 / 12 = Php 3,125
This is the amount that we will record as
depreciation expense for the month of March.
Adjusting Journal Entry:
GENERAL JOURNAL
DATE ACCOUNT TITLE DEBIT CREDIT
Adjusting Entry:
March 31 Depreciation expense-equipment 3,125
Accumulated depreciation- 3,125
equipment
To record monthly depreciation.
Summary …
GENERAL JOURNAL
DATE ACCOUNT TITLE DEBIT CREDIT
Adjusting Entries:
March 31 Supplies Used 1,200
Supplies 1,200
To adjust supplies that were used during the
period.
31 Utilities expense 1,800
Utilities payable 1,800
To record accrued utilities.
31 Account receivable 2.200
Service revenue 2,200
To record accrued laundry services.
31 Depreciation expense-equipment 3,125
Accumulated depreciation-equipment 3,125
To record monthly depreciation.
Posting to the Ledger…
Supplies Used SUPPLIES
Debit Credit Debit Credit
31 1,200 5 8,000
Bal 8,000
31 1,200
31 Bal. 6,800
GENERAL JOURNAL
DATE ACCOUNT TITLE DEBIT CREDIT
31 Supplies Used 1,200
Supplies 1,200
To adjust supplies that were used
during the period.
General Ledger
Account Receivable
CASH
Debit Credit
Debit Credit
17 7,000
1 300,000 5 8,000
14 3,000 9 3,500 Bal 7,000
12 90,000 31 2,200
15 1,500 31 Bal 9,200
303,000 103,000
Bal 200,000
Equipment
Debit Credit
SUPPLIES
Debit Credit 2 150,000
5 8,000
Bal 150,000
Bal 8,000
31 1,200
31 Bal. 6,800 Continued…
General Ledger
Accumulated depreciation-
equipment Rowena Cruz, Capital
Debit Credit Debit Credit
31 3,125 1 300,000
31 Bal 3,125 Bal 300,000
Account Payable
Debit Credit
12 90,000 2 150,000 Service Revenue
Bal 60,000 Debit Credit
14 3,000
17 7,000
Utilities Payable
Bal 10,000
Debit Credit
31 2,200
31 1,800
31 Bal 12,200
31 Bal 1,800
Continued…
General Ledger
Utilities Expense
Salary Expense Debit Credit
Debit Credit 31 1,800
15 1,500 31 Bal 1,800
Bal 1,500
Supplies Used
Rent Expense Debit Credit
Debit Credit 31 1,200
9 3,500
31 Bal 1,200
Bal 3,500
Depreciation expense -
equipment
Debit Credit
31 3,125
31 Bal 3,125
ADJUSTED TRIAL BALANCE:
After posting to the ledger, the
next step is to prepare the adjusted
trial balance to determine whether
the debits equal credits.
The adjusted trial balance is the
basis in preparing the financial
reports.
Rowena’s Laundry Shop
Adjusted Trial Balance
March 31, xxxx
Debit Credit
Cash 200,000
Account receivable 9,200
Supplies 6,800
Equipment 150,000
Accumulated depreciation-equipment 3,125
Account payable 60,000
Utilities payable 1,800
Rowena Cruz, Capital 300,000
Service Revenue 12,200
Rent expense 3,500
Salary expense 1,500
Supplies used 1,200
Utilities expense 1,800
Depreciation expense-equipment 3,125
Total 377,125 377,125
