YEAREND ACCOUNTING PROCEDURES Expense adjustments Grade 10 Accounting

EXPENSE ADJUSTMENTS • According to the matching principle, all expenses for the financial year

EXPENSES PAYABLE/ACCRUED EXPENSES • EXPENSES THAT YOU STILL NEED TO PAY • Accrued Expenses

EXPENSES PAYABLE/ACCRUED EXPENSES • Example: On 28 February 2008, the following totals appeared in

RECORDING ACCRUED EXPENSES JOURNAL GENERAL JOURNAL Debit Water and Electricity Repairs Accrued expenses Credit

Posting from GJ to GL: DR “Expense a/c” CR Accrued Expenses or Expenses Payable

RECORDING ACCRUED EXPENSES or EXPENSES PAYABLE L + ACCOUNT DEBIT ACCOUNT CREDIT ASSETS =

PREPAID EXPENSES • EXPENSES THAT YOU PAY IN THE CURRENT YEAR WHICH ONLY RELATE

PREPAID EXPENSES • Example: On 28 February 2008, the following totals appeared in the

RECORDING PREPAID EXPENSES JOURNAL GENERAL JOURNAL Debit Prepaid expenses Credit 4 500 Insurance 2

RECORDING DEFERRED INCOME: LEDGER GENERAL LEDGER PREPAID EXPENSES Feb 28 Insurance GJ 2 000

RECORDING ACCRUED INCOME ACCOUNT DEBIT ACCOUNT CREDIT ASSETS = OWNER’S EQUITY + Prepaid expenses

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YEAR–END ACCOUNTING PROCEDURES Expense adjustments Grade 10 Accounting Module 10 Lesson 4

EXPENSE ADJUSTMENTS • According to the matching principle, all expenses for the financial year must be brought into account during the current financial year, even if this expense has not yet been paid.

EXPENSES PAYABLE/ACCRUED EXPENSES • EXPENSES THAT YOU STILL NEED TO PAY • Accrued Expenses = LIABILITY

EXPENSES PAYABLE/ACCRUED EXPENSES • Example: On 28 February 2008, the following totals appeared in the Pre-adjustment Trial Balance of Aztec Stores: Water and Electricity R 14 500 Repairs R 4 000 Adjustments • The February 20. 8 water and electricity account, R 1 230, has not yet been paid. • An account for repairs, R 500, is still outstanding.

RECORDING ACCRUED EXPENSES JOURNAL GENERAL JOURNAL Debit Water and Electricity Repairs Accrued expenses Credit 1 230 500 1 730

Posting from GJ to GL: DR “Expense a/c” CR Accrued Expenses or Expenses Payable L + GENERAL LEDGER ACCRUED EXPENSES Feb 28 B Water & Elec GJ 1 230 Repairs GJ 500 28 Profit & Loss GJ 15 730 WATER & ELECTRICITY Feb 28 Total Accrued expenses bd GJ 14 500 FEB 1 230 15 730 REPAIRS Feb 28 Total Accrued Expenses bd GJ 4 000 FEB 28 Profit & Loss GJ 4 500

RECORDING ACCRUED EXPENSES or EXPENSES PAYABLE L + ACCOUNT DEBIT ACCOUNT CREDIT ASSETS = OWNER’S EQUITY Water & Electricity Accrued expenses 0 - R 1 230 + R 1 230 Repairs Accrued expenses 0 - R 500 + LIABILITIES

PREPAID EXPENSES • EXPENSES THAT YOU PAY IN THE CURRENT YEAR WHICH ONLY RELATE TO THE FOLLOWING FINANCIAL YEAR • Prepaid expenses = ASSET

PREPAID EXPENSES • Example: On 28 February 2008, the following totals appeared in the Pre-adjustment Trial Balance of Typo Stores: Insurance R 23 200 Rates R 14 500 Adjustments • The insurance amount includes an annual insurance contract for R 4 000 taken for the period 01 September 20. 7 – 31 August 20. 8. • The rates amount includes R 2 500 in respect of the next financial year.

RECORDING PREPAID EXPENSES JOURNAL GENERAL JOURNAL Debit Prepaid expenses Credit 4 500 Insurance 2 000 Rates 2 500 Insurance: 01 September 20. 7 – 31 August 20. 8 = 12 months 6 months are for this financial year R 2 000 6 months are for the next financial year R 2 000 R 4 000

RECORDING DEFERRED INCOME: LEDGER GENERAL LEDGER PREPAID EXPENSES Feb 28 Insurance GJ 2 000 Rates GJ 2 500 INSURANCE Feb 28 Total bd 23 200 Feb 28 Prepaid Expense GJ 2 000 28 Prepaid expense GJ 2 500 RATES Feb 28 Total bd 14 500 Feb

RECORDING ACCRUED INCOME ACCOUNT DEBIT ACCOUNT CREDIT ASSETS = OWNER’S EQUITY + Prepaid expenses Insurance + R 2 000 Prepaid expenses Rates + R 2 500 LIABILITIES