Accrual Accounting and End of Period Adjustments.mp4

Accural Accounting requires end of period adjustment (often referred to as Adjusting entries) so that the income and expenses are correctly matched to the period in which they occurr (not necessarily when the cash is paid or received). This video provides a simple example to explain the key concepts of accruals and prepayments.

Category:

Education

Tags:

• Accrual Accounting
• Adjustments
• adjusting entries
• accruals
• prepayments
• accrued income
• accrued expenses
• prepaid expenses
• unearned revenue
• accounting worksheet.

[Accountingintro]

two videos that might help with the context of this are - What is a Debit and Accounting Cycle Simple. Both of these are reasonably short video. Also the video supplies expense and supplies on hand goes into depth for one particular type of accrual.

[Accountingintro]

Hi TopBreh thank you for comments. I am not 100% sure of your question. But this is what I think the answer relates to. You get paid $5000 for Revenue, (so Dr Cash Cr Rev) but you pay $2500 for salaries (so Dr Expenses/Cr Cash). this is why your ending Cash Balance is only $2500 when you have received $5000 cash (and then paid out $2500).

[Accountingintro]

Hi TopBreh thank you for comments. I am not 100% sure of your question. But this is what I think the answer relates to. You get paid $5000 for Revenue, (so Dr Cash Cr Rev) but you pay $2500 for salaries (so Dr Expenses/Cr Cash). this is why your ending Cash Balance is only $2500 when you have received $5000 cash (and then paid out $2500)

[TopBreh]

Thus meaning that the two unadjusted trial balance totals should really have been debits and credits of 7,500 each rather than 5,000.....if that is not meant to be the case then I am confused as to why the credit for cash of 2,500 (related to expenses) is stated and not the debit for cash of 5,000 (related to revenues).

[TopBreh]

thanks this series of yours is great however I am confused with this part of the series. If in the unadjusted trial balance there is a credit of 5,000 to income/sales revenue why does it say that there is only a debit of 2,500 for cash, surely there should be a debit of 5,000 for cash so it matches with revenue? Also was the 2,500 debit of cash actually meant to be a credit to cash of 2,500 so that it corresponds with the expenses (debit) of 2,500?

[jelzap]

Thanks!