LECTURE NOTES CHAP 3:

ACCRUALS vs PREPAYMENTS
ADJUSTMENTS
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 Lecturer notes
Students should know, there are many types of Adjusting
entries AT THE END OF PERIOD:
 Adjusting for Prepayments (phân bổ)
 Adjusting for Accruals (ghi bổ sung/ghi dồn tích thêm)
 Adjusting for errors & correction
 Book Depreciation, Provision
 Test impairment loss
 Estimate Taxation
 ….
Journalize Accruals VS Prepayments transactions at the end of period
Events (Deferrals/Accruals or Prepayment) What is the proper Revenues and
Expenses for the period ended
Dec 31?
On December 15 2023, UEL Company received $3,600
cash for consulting services that will be performed
during 3 months from now. Prepare a general journal
entry to record the $3,600 cash receipt.

15/12/2023: Receive 3 months services in cash 31/12/2023: Allocate proper Revenues incurred for the
Dr Cash 3,600 (Asset - SFP) year 2023 (reflecting the Accrual basis principles)
Cr Unearned revenues 3,600 (Liability - SFP) Dr Unearned revenues (Liability - SFP) 3,600 x 1/6
đã phát sinh 1/2 tháng doanh thu
Cr Revenues (Rev – IS) 600 vào 31/12/2023, cuối niên độ đã
thự c hiện bút toán điều chỉnh

PREPAYMENTS OR ACCRUALS?
Journalize Accruals VS Prepayments transactions at the end of period
Events (Deferrals or Prepayment) What is the proper Revenues and
Expenses for the period ended Dec 31?
On October 1 2023 of the current year, UEL Company
paid $9,600 cash for a one-year insurance policy that
took effect on that day. On the date of the payment,
record the entry?

1/10/2023: Paid 1 year insurance in cash 31/12/2023: Allocate proper Insurance expenses incurred
Dr Prepaid Insurance 9,600 (Asset - SFP) for the year 2023 (reflecting the Accrual basis principles)
Cr Cash 9,600 (Asset - SFP) Dr Insurance Ex (Ex - IS) 9,600 x 3/12
khi nhận tiền Cr Prepaid Insurance (Asset – SFP) 2,400 cuối niên độ

PREPAYMENTS OR ACCRUALS?
 Journalize some odd transactions
Journalize Accruals VS Prepayments transactions at the end of period
Events (Deferrals or Prepayment) What is the proper Revenues and Expenses
for the period ended Dec 31?

UEL Co had $1,500 of store supplies at the beginning of the current

year. During this year, UEL purchased $8,250 worth of store supplies.
On December 31, 2023 $1,125 worth of store supplies remained.
Record the purchases entry?

During 2023, purchase Supplies: 31/12/2023: Allocate proper Supplies expenses incurred for the
Dr Supplies 8,250 (Asset - SFP) year 2023 (reflecting the Accrual basis principles)
Cr Cash/AP 8,250 Dr Supplies Ex (Ex - IS) X 8.625
Cr Supplies (Asset - SFP) X 8.625

Supplies: không phân bổ theo tháng mà phân bổ theo thực tế sử dụng Supplies Supplies Ex
1.500
X = 8.625
8.250 X X

PREPAYMENTS OR ACCRUALS? 1.125

 Journalize some odd transactions
Journalize Accruals VS Prepayments transactions at the end of period
Events (Deferrals or Prepayment) What is the proper Revenues and Expenses
for the period ended Dec 31?
UEL company purchased a new truck at a cost of $42,000 on July 1,
2023. The truck is estimated to have a useful life of 6 years and a
salvage/scrap/residual value of $3,000. The company uses the
straight-line method of depreciation. Record the purchase and the
depreciation for the year ended December 31, 2023?

1/7/2023, purchase Truck: 31/12/2023: Allocate proper Depreciation Expense (on using truck)
Dr Truck 42,000 (Asset - SFP) incurred for the year 2023 (reflecting the Accrual basis principles)
Cr Cash/AP 42,000 Dr Depreciation ex (Ex - IS) [(42,000 – 3,000)/6]x6/12
Cr Accumulated Depreciation (Contra Asset – SFP) 3,250
khấu hao tích lũy

Straight-line method of depreciation computation:

Depreciation expenses = [(Cost – Residual value)/Useful life] x Real
nguyên giá - giá trị thanh lý thời gian sd hữu
time used asset ích
thời gian thực tế sử dụng

bút toán ghi nhận cp khấu hao là một dạng đặc biệt của chi phí trả trước
PREPAYMENTS OR ACCRUALS?
 Journalize some odd transactions
Journalize Accruals VS Prepayments transactions at the end of period
Events (accrued ex and rev) What is the proper Revenues and
Expenses for the period ended
Dec31?
On Dec 31 2023 UEL Co performed two thirds (2/3) of 3 months consulting
services costing $9,000 that will be paid in January 31. Did UEL receive any cash
at Dec 31? And Did u perform the services?
How can we (accountants) help?

During 12/2023, Perform services 31/12/2023: Adjust/Accrue proper Services revenues incurred for the
without receiving Cash, no entries year 2023 (reflecting the Accrual basis principles)
have been booked Dr AR 2/3 x 9,000
Cr Services revenues (Rev – IS) 6000

PREPAYMENTS OR ACCRUALS? ACCRUALS

 Journalize some odd transactions
Journalize Accruals VS Prepayments transactions at the end of period
Events (accrued ex and rev) What is the proper Revenues and
Expenses for the period ended Dec31?
UEL company has 20 employees who each earn $500 per week for a 5-day week
that begins on Monday and pay salaries on Friday every week. December 31 of
this year is a Monday, and all 20 employees worked that day. Did UEL pay
salaries on December 31 2023 or record something? How can we (accountants)
help?

Chi phí lương dồn tích phát sinh

Use services from employees without 31/12/2023: Adjust/Accrue proper Salaries expenses incurred for the
paying Cash for them, no entries year 2023 (reflecting the Accrual basis principles)
have been booked Dr Salaries expenses (Ex – IS) 500/5 x 20
Cr Services revenues (Rev – IS) 2,000
Salaries payable

PREPAYMENTS OR ACCRUALS?
Accrued interest (ghi chi phí lãi dồn tích)
Theo châu âu

• Dr Interest expenses (Finance cost)

• Cr Interest payable (Cr Accruals – nợ dồn tích)
• Accruals: TK phải trả khác, ghi nhận các khoản phải trả
nhỏ (other payables)
• Interest ex = Face value x Interest rate x time accrued
ĐÂY LÀ TÍNH HUỐNG ĐI VAY DƯỚI DẠNG THƯƠNG PHIẾU PHẢI TRẢ (NOTE PAYABLE)
Accrued interest revenues (ghi DT lãi dồn tích)
• Dr Accrued Interest (=Interest receivables)
• Cr Interest revenues

CHO VAY DƯỚI HÌNH THỨC PHÁT HÀNH NOTE RECEIVABLE

LÃI TÍNH THEO CÔNG THỨC ĐƠN GIẢN

IN SUMMARY
CƠ SỞ DỒN TÍCH

TIME PERIOD KỲ KẾ TOÁN

ASSUMPTIONS

GHI NHÂN DOANH THU

GHI NHÂN CHI PHÍ

 Accrual basis vs Cash basis
Accrual basis CƠ SỞ DỒN TÍCH Cash basis CƠ SỞ TIỀN MẶT

Revenues = Revenues incurred in the period Revenues = Cash receipts (tiền thu vào trong kỳ)
Expenses = Expenses incurred in the period Expenses = Cash payments (tiền chi ra trong kỳ)
Amounts based on vouchers GIÁ TRỊ PHẢI DỰA VÀO CHỨNG TỪ INCOME = TOTAL REV - TOTAL EX = TOTAL CASH RECEIPTS - TOTAL CASH
PAYMENT

Large corporations Small businesses

According IAS 01, Conceptual Framework: According IAS 01, IAS 07, Conceptual Framework:
Basis for preparing: Basis for preparing:
- Income statement, - Cash flows statement
- Statement of changes in Equity,
- Balance sheet (Statement of financial position)
IN SUMMARY
IN SUMMARY