ACTY 2100 - My Lecture Notes on EOY Adjustments (From September 25) PDF

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Download ACTY 2100 - My Lecture Notes on EOY Adjustments (From September 25) PDF

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September 25 A lot of energy goes into calculating the net income b/c it determines much much income tax to pay, employee bonuses, etc. The Standard of Accounting is to be fair (it is impossible to get everything accurate) Buy insurance for 1 month pay $300 Insurance Expense Cash

300 300

Bought annual policy on December 1 for $2400 ($200 a month) Prepaid Insurance 2400 Cash 2400 It goes into prepaid insurance b/c it is not an expense at this point since it’s not over, it is considered an asset until it has been used You can turn things into expenses monthly Using have the year end (EOY) at the end of the calendar year EOY Adjustment (on December 31) Insurance Expense 200 Prepaid Insurance 200 The insurance has been used for one month so that makes $200 ($2400/12) If purchased on June 1 EOY Adjustment Insurance Expense Prepaid Insurance

1400 1400

If purchased on April 23 you only account for 8 months you don’t count the insurance hasn’t covered more than half of the month fairness to the nearest month if started before the 15th, it counts for one month, but if started after the 15th, it doesn’t count Bought Policy on September 25 for $1,700 for one year Prepaid Insurance 1,700 Cash EOY Adjustment Insurance Expense 425 Prepaid Insurance

1,700

425

Tenant rents an office in a building with rent of $500 for one month Rent Expense 500 Cash

500

Paid the rent for the whole year $5000 (landlord gives a discount for economic incentive to pay) Prepaid Rent 5,000 Cash 5,000 It is not an expense yet because the rent hasn’t be used, so it’s an asset until it has been used Paid for rent on November 15 for $5000 $5000/12 months= $417 p/m $417*2 months= $834 for 2 months We don’t calculate a half month’s rent, you could, but we don’t EOY Adjustment Rent Expense 834 Prepaid Rent

834

Accounting for the Landlord of the office in this building for One Month Cash 500 Rental Income 500 You could use rent fees, rent earned, but rental income is the most commonly used For a Year Cash 5,000 Unearned Rent 5,000 You are responsible for providing the building, so it is a liability account b/c it hasn’t been provided yet EOY Adjustment Unearned Rent 834 Rental Income 834 Pay close attention to whether you are accounting for the tenant or the landlord

Bought supplies for $300 Supplies Cash

300 300

All supplies will turn into an expense b/c you are going to use them up within a year You could account for them as they were used, one at a time, but you don’t need to be this particular in going item by item Normally, you wait until the end of the year and count (evaluate) what’s left If there are 50 supplies left at the end of the year Started with 300

Counted what’s left (50) Used 250 EOY Adjustment Supply Expense 250 Supplies 250 It is easier to take starting chas and subtract the end cahs to find out the costs instead of adding things up individually b/c that takes a lot of time

Bought 4 Floppy Discs at $1 each Supplies Cash Bought 5 more Supplies Cash Started with 9 Counted what’s left (3) Used 6 EOY Adjustment Supply Expense Supplies

4 4 5 5

6

Company came in and stocked toilet paper in closets and sent a bill Supplies 300 Cash Supplies 350 Cash Supplies 200 Cash

6

300 350 200

At the EOY, you count the toilet paper and see how much is left (can be an estimate, not exactly) Started with 300+350+200=850 What is Left (200) Used 650 EOY Adjustment Supply Expense 650 Supplies 650...