9

• Depreciation


  It is applied to components of property, plant and equipment or PPE
• To record depreciation


  1. Dr. DEPRECIATION EXPENSE

  2. Cr. ACCUMULATED DEPRECIATION
• Depreciation Expense


  Cost of PPE - Estimated Residual Value / Estimated Useful Life
• To record building depreciation on Dec 31, 2016


  1. Depreciation Expense 87,500

  2. Accumulated Depreciation 87,500
• Bad Debts


  Customers who later on would not be able to pay their dues
• To record bad debts

  1. Dr. BAD DEBTS EXPENSE

  2. Cr. ALLOWANCE FOR BAD DEBTS
• Prepaid Expenses


  Expenses paid even before they are incurred
• To record prepaid expenses

  1. Dr. PREPAID EXPENSE

  2. Cr. CASH
• To record expired prepaid expenses

  1. Dr. EXPENSE

  2. Cr. PREPAID EXPENSE
• Accrued Expenses


  Incurrence comes before the actual disbursement of cash
• To record accrued expenses

  1. Dr. EXPENSE

  2. Cr. ACCRUED EXPENSE PAYABLE
• Unearned Revenue


  Cash received before services are rendered
• To record unearned revenue

  1. Dr. CASH

  2. Cr. UNEARNED REVENUE
• To record earned unearned revenue

  1. Dr. UNEARNED REVENUE

  2. Cr. REVENUE
• Accrued Revenue


  Rent received after services are completely rendered, common when rendering services subject to conditions
• To record accrued revenue

  1. Dr. RECEIVABLE

  2. Cr. REVENUE
• After adjusting entries, next steps are: Adjusted Trial Balance, Financial Statements (Income Statement, Balance Sheet, Changes in Owner's Equity), Closing Entries, Post-Closing Trial Balance