 Hello in this lecture. We will take a look at a problem that will be similar to a homework problem The numbers will change the format will remain much the same We're remembering our objectives, which are two-fold one We want to get the concepts of of the accounting concepts in two We want to work on navigating around an excel sheet So here we have the accounting equation up top once again, and we have our trial balance over here You'll note that this side of the trial balance is now called the unadjusted trial balance because we are going to be recording the adjusting process Journal entries in this case so that means that what has happened as of this point in time is we want to imagine that a Month or time period has passed and it out is now the end of the month or the end of the year and The transactions for that time period have now been input and now we want to do the adjusting process Which would be done at the end of each month or the end of each year depending on the size and type of company That we would be looking at our goal is to make the Financial statements correct as of that time period because as of the end of the date of the month or year That's when we will create the financial statements And so as of that time frame we want everything to be perfectly on an accrual basis as much as possible So that it could then be used to create the financial statements So we have the unadjusted trial balance on this side and we've got of course the assets over here We've got the liabilities We've got the equity and the income statements Then we're going to record our adjusting entries which are going to be all as of the end of the time period and Then we're going to have our adjusted trial balance This will be our just a trial balance Which is as close to a perfect accrual basis as we can be so that we could then use it to Create the financial statements. So we are of course are going to record our transactions here So these adjusting entries are going to be recorded here Then we are going to post them to this center column and see the quick adjustment that will happen From posting those transactions We can then use this worksheet as needed in order to do any calculations that we may need in the process So there's going to be some rules that might make the adjusting entries easier now remember these are rules Specifically some of them specifically for the adjusting entry process. So specifically for the end of the period adjusting entry process We still have the same rule of every transaction is going to have two accounts Every transaction is going to have at least a debit the same amount of debits and credits new rules solely for adjusting entries include that Every transaction is going to have one balance sheet account above the blue line And it's going to have one income statement account below the blue line And we know that all income statement accounts only go one way They generally go up if we apply that then we can see which way these Adjusting entries will go many times without knowing exactly what we're talking about and then we'll analyze, you know Why so that's the approach will take on this as of the cutoff date Supplies are counted and have the following value 1,050 so what that means is well first what accounts are we going to be adjusting? Let's take a look at the balance sheet accounts above the blue line What account would be related to supplies in this case and it's not a trick question We see supplies right there. That's an account that will be affected. I'm going to go ahead and make that a different color I'm going to make it green to indicate that we will be working with that account What will be the account below the blue line in the income statement revenue and expense type accounts? And we have a supplies expense here So it's likely that that's the account that will be affected once again I'm going to make that green by right-clicking and using that icon then the question is well These are balanced. These are income statement counts. They only go one way These are all expenses and they all have debit balances and they only go one way they go up How do we make something go up? We do the same thing to it which in this case would be a debit So I'm going to go ahead and copy this supplies expense. I'm going to put it on top Representing the fact that it will be debited and if there's only one other account that is affected and it's that one Then I'm going to put this on the bottom representing the fact that that must be an account That's going to be credited So if we go through it, so I'm right-click paste it 1 2 3 if we go through that process We can see that then this account will be what's debited this accounts What's credited even though we don't really know what we're talking about other than we'll do with supplies in the adjusting entry process So now let's analyze what we're talking about and why these two accounts would be affected if we look at supplies We say hmm. We have an amount of 3975 in it. What's the transaction that records that amount every time the bookkeeper buys supplies or the account department buys supplies they They debit the supplies account here the asset not the expense and then they credit Cash or accounts payable. We've told them to set it up that way and not not to Record the expense. We are now going to do the adjustment at the end in order to record the amount that has been used How do we know how much of the supplies have been used? We counted it and when we counted it We said that there's supplies in a dollar value left of $1,050 so that means that this amount here needs to go down to the amount that we counted to There the difference is what we're going to assume that we used and that therefore it should be expense because we consumed it last month In order to help us generate revenue for the matching principle That's when we should expense the supplies so if we look at our worksheet then what we're saying is that we currently have 3975 in supplies right there We counted it to be If we did the calculation here in Excel, I'm going to say equals I'm going to point to this number minus this number Enter, so then this this 295 2925 is what this needs to go down by in order to bring us to the physical count of 1050 so that will be our journal entry over here so the journal entry should be 2925 and Both a debit and a credit so we're going to debit and credit 2925 and that should bring this down to the physical count of 1050 let's see if that's the case so I'll post the expense first So here's the expense down here in column our cell h20 will say equals and We'll post this expense when we hit enter this will go up take us out of balance. We'll bring net income down So notice net income went down from 88 855 to 85 930 and that's going to be these accounts revenue minus the expenses and Then we'll compose the other side here. So we are in h7 We'll say that equals and then we're going to point to the supplies account there the credit and this is a debit That's a credit. They're the opposite therefore It's going to make it go down to hopefully our physical count there So now we we're assuming that we of course used the 2925 of supplies in this case Now you might be thinking well that might not be what happened What if it's got stolen or lost or something like that that could happen the assumption being that? It was used now if it was stolen or lost and there's a significant difference between this month and last month We might then put in measures to account for things like that as we go B then says as of the cut off date the amount of cash received in advance of work performed is the following value So this one may be a little bit more difficult for us to determine which accounts are affected It doesn't exactly say supplies in it on this one But if we analyze that we're talking about Something we received before we did the work and we know that there's going to be one balance sheet account and one income statement accounts if we look at the balance sheet accounts above the blue line Got accounts people supplies prepaid insurance land equipment accumulated Accounts payable wages and under and revenue and it's actually going to be under and revenue in this case meaning that We got paid before we did the work Oftentimes we get that confused with accounts receivable, which is the opposite meaning we did the work before we got paid So this is a more unusual type of transaction that we got paid before we do the work Because that doesn't happen in every type of industry usually we do the work and then we invoice but we might get a down payment We might be like if we were selling magazines or something like that We might get a yearly subscription before we give them the magazine or if we sell concert tickets or something like that We sell a ticket before we give the concert. So now When that happens, we're going to tell the accounting department. Hey You're going to debit cash and then you're going to credit unearned revenue. We're going to tell the accounting department Hey, you're going to debit cash and then you're going to credit unearned revenue not revenue Because has not that yet been earned and then we in the adjusting department will determine how much has been earned