Principles of
Accounting
(ACC 111) – Accrual & Cash base and Adjustments
GHIAS UL HASSAN KHAN
MBA, ACCA, AICS, MCE, MIE
PHD – IN PROGRESS
Quote of the day
It is required for the vendor
to tell the buyer of any
defects of which he is aware.
Prophet Mohammad (PBUH)
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1. What is accrual base accounting?
Agenda 2. What is cash base accounting?
3. What do we mean by adjustments
4. Why adjustments needed
5. How to make adjusting entry
6. What is adjusted trial balance?
GHIAS UL HASSAN KHAN 10/25/2024 3
Accrual vs. Cash base accounting
The difference between cash and accrual accounting lies in the timing of when
sales and purchases are recorded in your accounts.
1. Cash accounting recognizes revenue and expenses only when money
changes hands
2. In Accrual accounting recognizes revenue when it's earned, and expenses
when they're billed.
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Adjustments and Adjusted Trial
Balance
1. Types of adjustment
a) Fixed
b) Varies with trial balance comparative
c) Varies as separate cases
2. What is adjusted trial balance
3. Concept of 10 – column worksheet
4. Financial Statements
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Practic
e
questi
on 1
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Practice question 2
The following information has not yet been
recorded:
1. Rates owing on 30 June, $4820.
2. Depreciation on the equipment is $3680.
Depreciation on the building is $9600.
3. An advance fee payment of $600 for minor surgery
to be performed in July 2016 was credited to Fees
Earned.
4. The mortgage contract provides for a monthly
payment of $1000 plus accrued interest. The June
payment was not made. Interest of $260 is accrued
on the mortgage.
5. Prepaid insurance of $1340 has expired.
6. Salaries earned but not paid amount to $2360.
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Practice question 3
Following additional information is available for
DEBIT BALANCES:
adjustment:
Cash Rs.80,000; Account ReceivableRs.120,000;
Allowance for bad debts Rs.2,000; Merchandise 1. Commission earned Rs.108,000.
Inventory Rs.137,000; Prepaid Rent Rs.18,000; 2. Rent expired Rs.12,000.
Equipment Rs.2,00,000; Drawing $72,000; Cost of
Goods Sold Rs.3,60,000; Utilities expense 3. Accrued Wages Rs.18,000.
Rs.48,000; Wages expense Rs.64,000; Office
Supplies Expense Rs.30,000.
4. Depreciation was estimated at 5% on cost.
CREDIT BALANCES: 5. Allowance for bad debts 2% of A/R
Sales Rs.439,000; Commission Rs.120,000; Bond 6. Office supplies used Rs.26,000.
Payable Rs.90,000, Capital Rs.?
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Practice question 4
The following Trial balance data have been taken from the books of Data for Adjustments:
Tow Plc. The accounts are maintained to meet the requirements of
accounting standards and generally accepted accounting policies. 1. Unexpired insurance on December 31, Rs.2,400
Cash Rs.133,200; Accounts Receivable Rs.196,800; Merchandise 2. Supplies used Rs.2,000.
inventory (Jan. 1. 2013) Rs.248,000; Unexpired Insurance 3. The buildings are being depreciated over a 25-
Rs.7,200; Office supplies Rs.3,200; Building Rs.240,000; year useful life. The equipment is being
Accumulated Depreciation: Building Rs.9,600; Equipment depreciated over a 10-year useful life (Use
Rs.64,000; Accumulated Depreciation: Equipment Rs.19,200;
straight line method)
4. Salaries payable as of December 31, were Rs.
Accounts payable Rs.191,600; Tow Capital Rs.? 20,000
5. Inventory of merchandise on Dec. 31, was Rs.
Tow Drawing Rs.72,000; Sales Rs.1,304,000; sales Returns
158,400.
Rs.20,800; Purchases Rs.760,000; Purchase Return Rs.8,000;
Transportation in Rs.19,200; Salaries expense Rs.161,600; Misc.
Expenses Rs.4,400.
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Thanks & continue to the next
part
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