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Advance Payment of Revenues: Liability Method

The document discusses accounting for advance payments of revenue using the liability and income methods. It shows entries for May 15 and May 31 where $10,000 was received in advance for services, with $4,000 being earned as of May 31 and the remaining $6,000 being recorded as unearned revenue. It then asks how much remains as an obligation for future services.

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2K views9 pages

Advance Payment of Revenues: Liability Method

The document discusses accounting for advance payments of revenue using the liability and income methods. It shows entries for May 15 and May 31 where $10,000 was received in advance for services, with $4,000 being earned as of May 31 and the remaining $6,000 being recorded as unearned revenue. It then asks how much remains as an obligation for future services.

Uploaded by

Dan Ryan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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Advance payment of Revenues

Liability Method:

May-15 Cash 10,000.00


Unearned Revenue

May-31 Unearned Revenue 4,000.00


Revenue
*Magkano yung na-earn?

Revenue 4,000.00
Unearned Revenue 6,000.00
Income Method

Cash 10,000.00
10,000.00 Revenue 10,000.00

Revenue 6,000.00
4,000.00 Unearned Revenue 6,000.00
*Magkano pa yung utang na service?

Revenue 4,000.00
Unearned Revenue 6,000.00
Dec-31

February 15, 2021

May-31

Reversing Entries Jun-01

Jun-10

Year End:
Question:

Jun-30 Salaries Expense


Salaries Payable

Jul-01 Salaries Payable


Salaries Expense

Jul-02 Salaries Expense


Cash

Year End:
Question:
Dec-31 Salaries Expense
Salaries Payable

Jan-01 Salaries Payable


Salaries Expense

Jan-02 Salaries Expense


Cash

January
December

Year End:
Question:

Sep-30 Salaries Expense


Salaries Payable

Oct-01 Salaries Payable


Salaries Expense

Oct-02 Salaries Expense


Cash

January
December
Incurred Php 50,000 Expenses to be paid on February 2021

Accrual Basis
Expenses

NO ENTRY

Salaries Expense

Salaries Payable

Salaries Expense

Payment of Salary

June 30, 2020


Assume that, on July 2, a Friday, the entity
which is on a five- day workweek and pays
employees weekly, paid its regular salaried employees amounted
to Php 192,000.

115,200.00

115,200.00

192,000.00

76,800.00

December 31, 2020


Weekly payroll is Php 84,000, paid every Friday for a five- day workweek.
Assume that December 31, 2020 falls on Wednesday so the employees
will not be paid until Friday, January 2, 2021.

50,400.00

50,400.00

84,000.00

33,600.00
50,400.00
84,000.00

Sep-30
Salaries are paid on Saturdays. The weekly payroll is Php 25,200. Assume
that September 30 falls on a Thursday and the entity has a six- day pay week.

16,800.00

16,800.00

25,200.00

8,400.00
16,800.00
25,200.00
Cash Basis
50,000.00 NO ADJUSTING ENTRY
Payable 50,000.00

Expenses 50,000.00
Cash
1,800.00
Salaries Payable 1,800.00

1,800.00
Salaries Expense 1,800.00

7,200.00
Cash 7,200.00

5,400.00

115,200.00

115,200.00

192,000.00
50,400.00

50,400.00

84,000.00

16,800.00

16,800.00

25,200.00
50,000.00

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