Accounting Lecture 05 - Adjusting Entries for Accruals

Recording adjusting entries for accrued expenses and revenues. Part II of two parts.

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[khattak4life]

Nice uploads . adjusted trail balance comes all of sudden. Sorry i still understand how new figures come ? seems some steps got missed. utility expense and utility payable got increased as well without any information in video. Revenue got increased as well. insurancevalid premium is mentioned as 800 with 100 shown in expense but where another 100 gone as total was 1000. please explain it for me and oblige. regards

[AccountingTutor]

@khattak4life

I think you might have overlooked the first entry at time mark 3:39 where Utility Expense is debited and Utilities Payable is credited. Accounts Receivable is debited and Revenue is credited at time mark 7:38. The adjusted trial balance is shown at time mark 10:07, at the end of video, so I don't understand what you mean by "all of a sudden." Insurance Expense and Prepaid Insurance balances do not change in the video. These adjustments are explained in Lecture 04.

[Lurch150]

at 6:49 the wages expense account is debitted (I hope I'm getting this right) at $400 and the wages Payable account is debitted at $100. Why are they different names? They're exactly the same account merely dublicated for time sake. Correct? I know technically it's kind of a dumb question, but if there's anything I'm learning about Accounting, its how particular the wording is.

Why aren't those two accounts named the same thing if they're serving exactly the same purpose?

[AccountingTutor]

@Lurch150

Oops! Not true, I'm afraid. The entry you cite records the payment of the wages after the adjusting entry is made. Since there is a balance in the Payable account now, it must be debited (decreased), and Cash must be credited for the total wage payment, The additional amount paid represents Wages Expense incurred in the current period.

[donni2121]

Very very helpful !!! Are there any useful tips for recognizing deferrals and accruals on a trial balance ? I would very appreciate your help. Thanks

[AccountingTutor]

@donni2121

There sure is. As indicated in the videos, if cash is paid or received -after- the adjusting entry, the adjustment was for an accrued expense or revenue. If the cash is paid or received -before- the adjusting entry, the adjustment was for a deferred expense or revenue.

[AccountingTutor]

@donni2121

There sure are. Accrued revenues always involve a debit to a receivable account and a credit to a revenue account; accrued expenses involve debits to expense accts and credits to a payable acct. Deferrals involve credits to prepaid expense accts (supplies, pp insurance, pp rent, etc) or accum depreciation with debits to exp accts. Deferred revenue adjustments affect only the unearned revenue (a liability) account.

[zain4444]

Beautiful teaching.. : )