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CHAPTER 3 – ADJUSTING THE ACCOUNTS Part 2 of 3
Adjusting for Accruals Accrued Revenue • are jobs that have been preformed but have not been either paid in cash or recorded on the statements. Accrued Expenses • Are expenses that are incurred in order to perform a job, that have not yet been paid for or recorded on our statements. Prior to adjustments, assets /liabilities, and revenues/expenses are understated.
Accrued Expenses Accrued Interest: • When we borrow money, we need to pay interest on that money. • FV = Face Value (amount of loan) • Annual Interest Rate • Time = in terms of 1 yr.
Accrued Expenses cont... Accrued Salaries • These are wages that have been preformed, but we have not paid out yet. Salaries Expense XXX Salaries Payable XXX
Work for this Section Brief Exercise • 3-5 Exercise • 3-5