Chapter 8
Adjustments for
Merchandizing Business:
商业企业会计调整
2
The Accounting Cycle
Prepare trial balance.
Make end-of-year adjustments.
Prepare adjusted trial balance.
Prepare financial statements.
Prepare after closing trial balance.
Journalize and post closing entries.
3
Adjusting Accounts
An adjusting entry is recorded to bring an asset or liability account balance to its proper amount.
Prepaid
insurance
adjustment
Unearned
revenue
Depreciation
Supplies
Merchandize
Inventory
12
12
Periodic inventory method
定期盘存制
Expense Account
Merchandize inventory
Adjusting
(ending inventory)
adjusting
Adjusting
(ending inventory)
Purchase
amount in
This period
4
Adjustment for merchandize inventory
A merchandizing business must make adjustment for inventory account when using periodic method to record the inventory.
Computing Cost of Goods Sold in Periodic Inventory System
The accounting records of Party Supply show the following:
Inventory, Jan. 1, 2003 $ 14,000
Purchases (during 2003) 130,000
At December 31, 2003, Party Supply counted the merchandise on hand at $12,000.
Calculate Party Supply’s cost of goods sold for 2003.
4
Computing Cost of Goods Sold in Periodic Inventory System
Cost of Goods Sold can be calculated as follows:
4
Periodic inventory method
定期盘存制
Cost of Good Sold
12/31
12000
12/ 31
14000
Merchandise inventory
12/ 31
14000
1/1
14000
12/ 31
12000
adjusting
closing
1/1----12/ 31
130000
12/ 31
130000
adjusting
4
Periodic inventory method
定期盘存制
Income Summary
12/31
12000
12/ 31
14000
Merchandise inventory
12/ 31
14000
1/1
14000
12/ 31
12000
adjusting
closing
1/1----12/ 31
130000
12/ 31
130000
adjusting
4
Periodic inventory method
定期盘存制
Income Summary
Merchandise inventory
Adjusting
(beginning
inventory)
Beginning
balance
Adjusting
(ending inventory)
adjusting
adjusting
Adjusting
(ending inventory)
Adjusting
(beginning
inventory)
Purchase
amount in
This period
purchase
(Inventory
bought in
this period)
closing
Step 1
Step 2
4
Creating Cost of Goods Sold in Periodic Inventory System
adjust beginning balance of inventory to income summary
4
Creating Cost of Goods Sold in Periodic Inventory System
Now, Party Supply must record the ending inventory amount.
4
The Materiality Principle
(重要性原则）
An item is “material” if knowledge of the item might reasonably influence the decisions of users of financial statements.
Adjusting Supplies
On December 1, 2001, Scott Company paid $1,500 yuan worth of supplies for cash,
16
16
Adjusting Supplies
On December 31, 2001, Scott Company take a physical count of the supplies and found that there were 500 yuan worth of supplies left. The adjusting journal entry ($1000) needed on December 31, 2001 is shown below.
16
16
Adjusting Supplies
After posting, the accounts involved look like this:
18
18
Converting Liabilities to Revenue
-- Adjustment for Unearned Revenue
Prior Periods
Current Period
Future Periods
Transaction
Collected from customers in advance
(creates a liability).
End of Current Period
Adjusting Entry
Recognize portion
earned as revenue,
and
Reduce balance of
liability account.
4
Adjusting Unearned Revenue (liability)
Cash received in advance for providing products or services.
Unearned revenue (liability)
Revenue
Unadjusted
Balance
Credit
Adjustment
Debit
Adjustment
25
25
The Accounting Cycle
Prepare trial balance.
Make end-of-year adjustments.
Prepare adjusted trial balance.
Prepare financial statements.
Prepare after closing trial balance.
Journalize and post closing entries.
3
Assignment
Problem 3 on page 207
End of Chapter 8
8
2
3
12
12
4
4
4
4
4
4
4
4
16
16
16
16
18
18
4
25
25
3
