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    BSAC 1B Group 2 Review of The Accounting Process

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    jepsyut
    The trial balance does not prove that all accounting transactions have been recorded correctly, as errors can still exist that cause the debits and credits to balance. Adjusting entries are necessary to accurately reflect income, expenses, and financial position in the financial statements by adjusting for items like prepaid expenses, depreciation, and allowance for doubtful accounts. Prepaid expenses are assets representing expenses paid in advance that will be recognized as the benefit is consumed. Depreciation allocates the cost of a long-term asset over its useful life. The allowance for doubtful accounts account anticipates uncollectible receivables.

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    BSAC 1B Group 2 Review of The Accounting Process

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    jepsyut
    54 views2 pages
    The trial balance does not prove that all accounting transactions have been recorded correctly, as errors can still exist that cause the debits and credits to balance. Adjusting entries are necessary to accurately reflect income, expenses, and financial position in the financial statements by adjusting for items like prepaid expenses, depreciation, and allowance for doubtful accounts. Prepaid expenses are assets representing expenses paid in advance that will be recognized as the benefit is consumed. Depreciation allocates the cost of a long-term asset over its useful life. The allowance for doubtful accounts account anticipates uncollectible receivables.

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    BSAC-1B-Group-2-Review-of-the-Accounting-Process

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    The trial balance does not prove that all accounting transactions have been recorded correctly, as errors can still exist that cause the debits and credits to balance. Adjusting entries are necessary to accurately reflect income, expenses, and financial position in the financial statements by adjusting for items like prepaid expenses, depreciation, and allowance for doubtful accounts. Prepaid expenses are assets representing expenses paid in advance that will be recognized as the benefit is consumed. Depreciation allocates the cost of a long-term asset over its useful life. The allowance for doubtful accounts account anticipates uncollectible receivables.

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    Download as docx, pdf, or txt
    54 views2 pages

    BSAC 1B Group 2 Review of The Accounting Process

    Uploaded by

    jepsyut
    The trial balance does not prove that all accounting transactions have been recorded correctly, as errors can still exist that cause the debits and credits to balance. Adjusting entries are necessary to accurately reflect income, expenses, and financial position in the financial statements by adjusting for items like prepaid expenses, depreciation, and allowance for doubtful accounts. Prepaid expenses are assets representing expenses paid in advance that will be recognized as the benefit is consumed. Depreciation allocates the cost of a long-term asset over its useful life. The allowance for doubtful accounts account anticipates uncollectible receivables.

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    Does the trial balance prove the accuracy of accounting work done? Explain your answer.

    A Trial Balance in which the credit and debit accounts match does not prove that all transactions have
    been recorded in the proper accounts. In other words, the trial balance may agree without disclosing
    certain errors. 

    What is adjusting entry?

    Adjusting entries is an important part of accrual accounting. If adjusting entries are not made, your
    balance sheet, profit and loss statement, income statement and cash flow statement will not be
    accurate. Adjusting entries allow you to adjust income and expense totals to reflect your position more
    accurately.

    Prepaid Expense

    Prepaid expenses are future expenses that have been paid but not yet used up or expired. The amount
    of prepaid expenses that will be used up within one year are reported on a company's balance sheet as
    a current asset, called an expense to the company.

     Asset Method

    Under the asset method, a prepaid expense account (an asset) is recorded when the amount is
    paid. Prepaid expense accounts include Office Supplies, Prepaid Rent, Prepaid Insurance, and
    others.

     Expense Method

    Under the expense method, the accountant initially records the entire payment as expense.

    Depreciation

    Depreciation is a systematic process for allocating the cost of an asset to the accounting periods in
    which it is used up. Depreciation is necessary for measuring a company's net income in each accounting
    period. It is associated with buildings, equipment, vehicles, and other physical assets which will last for
    more than a year.

    (After reading the single line method)

    There are several methods in depreciating fixed assets. The most common and simplest is the straight-
    line depreciation method. Under the straight-line method, the cost of the fixed asset is distributed
    evenly over the life of the asset's life.
    ALLOWANCE FOR UNCOLLECTIBLE ACCOUNTS

    Allowance for Doubtful Accounts is a contra current asset account associated with Accounts Receivable.
    The company is anticipating that some accounts will be uncollectible in advance of knowing the specific
    account. When a specific account is identified as uncollectable, the Allowance for Doubtful Accounts
    should be debited, and Accounts Receivable should be credited to the company.

    Net realizable value (NRV)

    (After reading the sample problem)

    Take note that this amount is an estimate. There are several methods in estimating doubtful accounts.
    These estimates are often based on the company's past experiences.

    To recognize doubtful accounts or bad debts, an adjusting entry must be made at the end of the period. 

    INVENTORY
    (RECORDED USING THE PERIODIC INVENTORY SYSTEM)

    A periodic inventory system is a form of inventory valuation where the inventory account is updated at
    the end of an accounting period rather than after every sale and purchase. The method allows a
    business to track its beginning inventory and ending inventory within an accounting year. In a
    continuous inventory system, no continuous record of changes is kept.

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