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Adjusting Entries questions

From:Renalyn

2nd year accountancy student po aku. .

naguguluhan pu kc aku sa adjusting pa pinaghahalu halu na yung mga notes pati interest then me mga given dates na hindi specific kng months ba o days lang ikukumpyut. .i2 pu. .

the notes payable worth 30,000 is a 90-12% note acquired on November 30, 2009. No interest has been recorded. .

ska po may possibility ba na sa isang comprehensive problem is merong dalawang accounts payable sa Adjusting Entry? ?

me adjustment pu ba sa gantu. .
the co. ends december 31, 2009. . the 1000 of insurance expense is applicable to the first qqqquarter of 2010? ?

pasensya na pokung maraming tanung ang galing nyu po kc mag explain n mga thought na kailangan ng mga nagvivisit ng blog nyu eE. .

GODBLESS po! ! thamks in advance. .

Tatandaan nyo lang palagi, ang nagccause ng adjusting entries ay ang “Accrual Basis of Accounting”. Diba sa accrual basis of accounting, dito yung inirerecognize ang income pag na-earn at expense pag na-incur. Always keep this in mind. Kaya naman kailangan mag-adjust kasi minsan, hindi nai-uupdate ang records ng kumpanya para mareflect ang tamang balanse ng mga accounts if we will follow the accrual basis of accounting

On Interest Accruals and Note Payables:

“…the notes payable worth 30,000 is a 90-12% note acquired on November 30, 2009. No interest has been recorded. .”

Sa school, tatandaan mo, pag months ang ibinigay na description (e.g. 2-month note; 5-month note), pag nagcompute ka ng interest, use 12 months. Pag days ang binigay (e.g. 30-day note; 45-day note; 60-day note) use 360 or 365 days (usually sinasabi ito pero pag walang sinabi, it’s safe to use 365 days). Pag naman years, edi use years. Pag exact date ang binigay, at nasa alanganing date (e.g. note dated October 17) use 365 days.

Tandaan nyo palagi, ang RATE na ibinibigay sa inyo ay Annual Percentage Rate. Otherwise, sasabihin yan kung pang-monthly rate, quarterly rate or semi-annual rate yan. Pero pag walang sinabi, annual rate yan.

To answer your question. Since ang kumpanya nirecord lang nya nung na-acquire yung note (kasi talaga sa totoong buhay ina-update mo lang ang mga bagay-bagay during end of month or end of the year, or pag kinailangan, hindi inaaraw-araw ang pag-uupdate nitong mga to kaya kelangan ng so-called “adjusting entries”), kailangan mo irecognize yung interest na kinita nya during the time na hawak mo yung note which is from November 30, 2009 to the Balance Sheet date (which is usually Dec. 31) since sabi 90-day ito, we will use “days” as a means of computing the interest:

so…

30,000   *   12%   *   31 / 365   =  305.75

So, the company must accrue 305.75 na interest income for this particular note.  Kung maitatanong nyo, bakit “31/365” ang allocation ko? Kasi sabi ko nga, yung 9% pag one year na rate yun. So, kukunin mo lang yung part ng year na yun kung saan hawak mo yung note at kumita ka which is 31 days of the 365 days of the year.

“ska po may possibility ba na sa isang comprehensive problem is merong dalawang accounts payable sa Adjusting Entry? ?”

You’re talking about “Notes Payable, diba”. Oo, hija, especially sa auditing problems. Minsan tatlo, apat, lima. Marami. Sa totoong buhay maraming notes payable ang meron ang kumpanya even as much as how many debtors meron ang kumpanya. Pero, makukuha mo yan pag nagpractice ka nang nagpractice.

“the co. ends december 31, 2009. . the 1000 of insurance expense is applicable to the first qqqquarter of 2010? ?”

Meron. The fact na sinabi na hindi 1,000 ay para sa first quarter ng 2010, evidence yun na may adjusting entry kang kelangang gawin. PERO, depende ang magiging adjusting entry mo sa initial entry mo (or yung entrada mo nung na-accquire mo yung insurance). Pero ulit, according sa wording ng problem mo, ang ginamit nya ay Expense Method kasi ang sabi “1000 of the insurance expense” ipinahihiwatig nito na nirecord nya as expense yung buong insurance. So be careful sa wording ng problem at intindihin ang kinikwento ng problem.

Since ang  initial entry mo ay expense method (lahat ng insurance ay nirecord mo as Insurance expense), ganito ang magiging adj entry mo:

(dr) Prepaid Insurance   1,000

(cr) Insurance Expense 1,000

Bakit ganyan? Kasi Overstated ang EXPENSE mo eh, kasi nga nirecord mo lahat nung simula as an expense.  Eh hindi pa naman expense yung 1000 diba, next quarter pa yun magiging expense. Kaya babawasan mo yung expense mo by crediting it for an amount equal dun sa applicable pa next quarter.

Assuming naman kunyari, ang initial entry mo ay using Asset method (ang insurance mo ay ipinasok mo sa Prepaid Insurance nung na-acquire mo yung insurance) ganito magiging adj entry mo:

(dr) Insurance Expense xxx

(cr)  Prepaid insurance xxx

Bakit “xxx”, kasi hindi natin alam kung magkano ang buong insurance sa problem na ito. Ang alam lang natin dapat ang ending balance ng Prepaid Insurance mo ay 1000. Sa entry na ito, importanteng malaman nyo na ina-update natin ang balance ng Prepaid Insurance by recognizing part of it as an expense for the year and leaving those applicable for next year.

Pag may further questions, magcomment lang po 🙂

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  1. anicia co
    July 28, 2010 at 5:17 am

    kuya joseph, ang galing ng lectures mo. medyo na late na ata ako. i was browsing through google when i thought of tutorial of accounting search. i clicked on your blog, one part palang “about cash” yung nabasa ko, wow, i am very happy na very informative ito, madaling tandaan ang explanations. a very million thank you po , more power sa iyo.
    anicia

  2. maricris garduna
    October 14, 2010 at 1:55 am

    hi kuya joseph,

    as i browse through the internet looking for brief meanings of petty cash, i’ve bumped into your blog. and i said to myself “dang! maricris! why haven’t you discovered this blog when you were in college? you should have gotten better grades back then..
    you are a great teacher kuya, i wish you were my professor way back.. hahaha!
    i really hope you’ll teach more accounting students..

  3. November 13, 2010 at 5:34 am

    Hi Kuya Joseph
    I am so glad that I have reached your site. This is of big help to us accounting students. I also have an accounting Blog and I wish one of this days you can share something. 🙂

  4. sharmine
    December 5, 2010 at 8:01 pm

    hi!kuya J. . .thank you sa lectures mo.,ang galing mong mag-explain,.kaya ngayon mauumpisahan ko na ulit ang gagawin kong ass.,keep it up and more power!

  5. ine'z quijada
    January 18, 2011 at 4:46 am

    .. im newly fresh student of college ..in accounting ,,
    until now i don’t know how to adjust ..it’s hard ..
    hhuhuh…

    • January 25, 2011 at 11:38 pm

      we have a discussion about adjusting entries. Check out the “Categories”, you can find it at the right hand side of the blog 🙂

  6. D
    February 18, 2011 at 2:02 am

    hanep sa dami ng notes :)) idol!!

  7. alexis
    March 6, 2011 at 6:13 am

    papaano po ba i-adjust ana ganitong problem:
    Municipal taxes and fees for the month of May P300.00 is for the quarter ending June 30, 2004. Privelege tax paid P500 is for the calendar year 2004.
    sana po matulungan ninyo po ako..

    • March 6, 2011 at 2:35 pm

      sorry po, hindi po ako nagttackle ng Tax topics. 😦

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