YOUTH ON THE ROCK
BASIC ACCOUNTING
TUTORIAL P3
Edison S. San Juan
July 31, 2020
SPECIAL
DISCUSSION ON
ADJUSTING ENTRIES
PREPAYMENTS
ACCRUALS
ESTIMATES
BASIC ACCOUNTING TUTORIAL | ESS 2020
PREPAYMENTS
PAYMENT BEFORE SERVICE
PREPAID EXPENSES
Transactions already paid but
not yet incurred
UNEARNED REVENUES
Transactions where cash is already
received but the service is not yet
rendered
BASIC ACCOUNTING TUTORIAL | ESS 2020
PREPAYMENTS
UNEARNED REVENUE
liability method
INITIAL ENTRY
ACCOUNT DEBIT CREDIT
Cash xxx
Unearned Revenue xxx
ADJUSTING ENTRY
ACCOUNT DEBIT CREDIT
Unearned Revenue xxx
Revenue xxx
BASIC ACCOUNTING TUTORIAL | ESS 2020
BASIC ACCOUNTING TUTORIAL | ESS 2020
PREPAYMENTS
UNEARNED REVENUE
revenue method
INITIAL ENTRY
ACCOUNT DEBIT CREDIT
Cash xxx
Revenue xxx
ADJUSTING ENTRY
ACCOUNT DEBIT CREDIT
Revenue xxx
Unearned Revenue xxx
BASIC ACCOUNTING TUTORIAL | ESS 2020
An account used to show that revenue had been received and will
be applied to some future period?
a) unexpired insurance
b) unearned rent
c) unused supplies
d) accounts receivable
BASIC ACCOUNTING TUTORIAL | ESS 2020
An account used to show that revenue had been received and will
be applied to some future period?
a) unexpired insurance
b) unearned rent
c) unused supplies
d) accounts receivable
BASIC ACCOUNTING TUTORIAL | ESS 2020
Unearned revenue can best be described as an amount:
a) not collected and not currently matched with expense
b) collected and currently matched with expense
c) collected and not currently matched with expense
d) not collected and currently matched with expense
BASIC ACCOUNTING TUTORIAL | ESS 2020
Unearned revenue can best be described as an amount:
a) not collected and not currently matched with expense
b) collected and currently matched with expense
c) collected and not currently matched with expense
d) not collected and currently matched with expense
BASIC ACCOUNTING TUTORIAL | ESS 2020
Orange Co. sold six advertising spaces for P400 each, to be run in
the November 2010 through April 2011 issues. Orange credited
Unearned Advertising for P2, 400 on November 1. If Orange’s year
end is December 31, which of the following would be reflected in
Orange’s 2010 income statement?
a) Revenues of P800
b) Unearned Revenues of P800
c) Revenues of P1,600
d) Unearned Revenues of P1,600
BASIC ACCOUNTING TUTORIAL | ESS 2020
Orange Co. sold six advertising spaces for P400 each, to be run in
the November 2010 through April 2011 issues. Orange credited
Unearned Advertising for P2, 400 on November 1. If Orange’s year
end is December 31, which of the following would be reflected in
Orange’s 2010 income statement?
a) Revenues of P800
b) Unearned Revenues of P800
c) Revenues of P1,600
d) Unearned Revenues of P1,600
BASIC ACCOUNTING TUTORIAL | ESS 2020
Unearned Rent has a credit balance of P240,000 composed of the
following:
• January 1 balance of P45, 000 representing rent prepaid for three
months, January to March
• A credit of P195, 000 representing advance rental payment for
twelve months, beginning April 1.
The December 31 adjusting entry will require a debit to Unearned
Rent and a credit to Rent Revenue of:
a) P191,250
b) P195,000
c) P240,000
d) none of these
BASIC ACCOUNTING TUTORIAL | ESS 2020
Unearned Rent has a credit balance of P240,000 composed of the
following:
• January 1 balance of P45, 000 representing rent prepaid for three
months, January to March
• A credit of P195, 000 representing advance rental payment for
twelve months, beginning April 1.
The December 31 adjusting entry will require a debit to Unearned
Rent and a credit to Rent Revenue of:
a) P191,250
b) P195,000
c) P240,000
d) none of these
BASIC ACCOUNTING TUTORIAL | ESS 2020
ACCRUALS
SERVICE BEFORE PAYMENT
ACCRUED EXPENSES
Transactions already incurred
but not yet paid
ACCRUED REVENUES
Transactions already rendered
but are still collectible
BASIC ACCOUNTING TUTORIAL | ESS 2020
ACCRUALS
ACCRUED EXPENSE
ACCOUNT DEBIT CREDIT
Expense xxx
Payable xxx
ACCRUED REVENUE
ACCOUNT DEBIT CREDIT
Receivable xxx
Revenue xxx
BASIC ACCOUNTING TUTORIAL | ESS 2020
An adjusting entry for accrued expense is required when:
a) cash is paid before the expense is incurred
b) cash is paid after the expense is incurred
c) expense is recorded when cash is paid
d) none of these
BASIC ACCOUNTING TUTORIAL | ESS 2020
An adjusting entry for accrued expense is required when:
a) cash is paid before the expense is incurred
b) cash is paid after the expense is incurred
c) expense is recorded when cash is paid
d) none of these
BASIC ACCOUNTING TUTORIAL | ESS 2020
An adjusting entry for accrued revenue is required when:
a) cash is received before the revenue is earned
b) cash is received after the revenue is earned
c) revenue is recorded as cash is paid
d) none of these
BASIC ACCOUNTING TUTORIAL | ESS 2020
An adjusting entry for accrued revenue is required when:
a) cash is received before the revenue is earned
b) cash is received after the revenue is earned
c) revenue is recorded as cash is paid
d) none of these
BASIC ACCOUNTING TUTORIAL | ESS 2020
Accrued salary expense is an expense:
a) paid but not incurred
b) incurred but not paid
c) incurred and paid
d) not reasonably estimable
BASIC ACCOUNTING TUTORIAL | ESS 2020
Accrued salary expense is an expense:
a) paid but not incurred
b) incurred but not paid
c) incurred and paid
d) not reasonably estimable
BASIC ACCOUNTING TUTORIAL | ESS 2020
What is the effect of recording an accrued expense?
a) increase an expense; decrease an asset
b) decrease and expense; increase an asset
c) decrease and expense; decrease a liability
d) increase an expense; increase a liability
BASIC ACCOUNTING TUTORIAL | ESS 2020
What is the effect of recording an accrued expense?
a) increase an expense; decrease an asset
b) decrease and expense; increase an asset
c) decrease and expense; decrease a liability
d) increase an expense; increase a liability
BASIC ACCOUNTING TUTORIAL | ESS 2020
Failure to adjust an accrued wages at year-end will result in an:
a) overstatement of liability
b) understatement of owner’s equity
c) overstatement of profits
d) understatement of assets
BASIC ACCOUNTING TUTORIAL | ESS 2020
Failure to adjust an accrued wages at year-end will result in an:
a) overstatement of liability
a) understatement of owner’s equity
b) overstatement of profits
c) understatement of assets
BASIC ACCOUNTING TUTORIAL | ESS 2020
At the end of the accounting period, a company falls to record the
accrual of interest receivable. As a result, the company's:
a) liabilities will be understated
b) owner's equity will be overstated
c) income for the period will be understated
d) total will be overstated
BASIC ACCOUNTING TUTORIAL | ESS 2020
At the end of the accounting period, a company falls to record the
accrual of interest receivable. As a result, the company's:
a) liabilities will be understated
b) owner's equity will be overstated
c) income for the period will be understated
d) total will be overstated
BASIC ACCOUNTING TUTORIAL | ESS 2020
On October 2, 2006, Villar Company received a promissory note for
P90, 000. Interest on this note is 15% per annum and is due one
year from the date of issuance. Which of the following items would
appear on Villar Company's balance sheet on December 31, 2006?
a) Unearned Interest of P3,375
b) Prepaid Interest of P3,375
c) Interest Payable of P3,375
d) Interest Receivable of P3,375
BASIC ACCOUNTING TUTORIAL | ESS 2020
On October 2, 2006, Villar Company received a promissory note for
P90, 000. Interest on this note is 15% per annum and is due one
year from the date of issuance. Which of the following items would
appear on Villar Company's balance sheet on December 31, 2006?
a) Unearned Interest of P3,375
b) Prepaid Interest of P3,375
c) Interest Payable of P3,375
d) Interest Receivable of P3,375
BASIC ACCOUNTING TUTORIAL | ESS 2020
The Del Pilar Enterprises pays its weekly salary of P50, 400 for a 6-
day work ending on Saturday. The company follows the calendar
year ending on December 31. Assuming that December 31 falls on a
Thursday, how much is accrued salaries as of the end of the
accounting period?
a) P16,800
b) P8,400
c) P33,600
d) not given
BASIC ACCOUNTING TUTORIAL | ESS 2020
The Del Pilar Enterprises pays its weekly salary of P50, 400 for a 6-
day work ending on Saturday. The company follows the calendar
year ending on December 31. Assuming that December 31 falls on a
Thursday, how much is accrued salaries as of the end of the
accounting period?
a) P16,800
b) P8,400
c) P33,600
d) not given
BASIC ACCOUNTING TUTORIAL | ESS 2020
The trial balance of Speedy Tours includes Salary Expense with a
debit balance of P6, 200. One adjusting entry in July requires an
accrual of salary expense, P900. What will be the correct balance in
Salary Payable and Salary Expense in the adjusted trial balance
columns of the worksheet?
a) P0; P5,300 debit, respectively
b) P900 debit; P900 debit, respectively
c) P900 credit; P7,100 debit, respectively
d) P7,100 credit; P900 debit, respectively
BASIC ACCOUNTING TUTORIAL | ESS 2020
The trial balance of Speedy Tours includes Salary Expense with a
debit balance of P6, 200. One adjusting entry in July requires an
accrual of salary expense, P900. What will be the correct balance in
Salary Payable and Salary Expense in the adjusted trial balance
columns of the worksheet?
a) P0; P5,300 debit, respectively
b) P900 debit; P900 debit, respectively
c) P900 credit; P7,100 debit, respectively
d) P7,100 credit; P900 debit, respectively
BASIC ACCOUNTING TUTORIAL | ESS 2020
By July 31, 2010 Win Company had rendered services in the amount of P1,400
that it has yet to bill. What adjusting entry should be recorded to state the July
income properly?
a) debit Service Revenue, credit Unearned Service Revenue for 1,400
b) debit Service Revenue, credit Unaccounted for Revenue for 1,400
c) debit Unearned Service Revenue, credit Service Revenue for 1,400
d) debit Accounts Receivable, credit Service Revenue for 1,400
BASIC ACCOUNTING TUTORIAL | ESS 2020
By July 31, 2010 Win Company had rendered services in the amount of P1,400
that it has yet to bill. What adjusting entry should be recorded to state the July
income properly?
a) debit Service Revenue, credit Unearned Service Revenue for 1,400
b) debit Service Revenue, credit Unaccounted for Revenue for 1,400
c) debit Unearned Service Revenue, credit Service Revenue for 1,400
d) debit Accounts Receivable, credit Service Revenue for 1,400
BASIC ACCOUNTING TUTORIAL | ESS 2020
