OBJECTIVESTHINK: DETERMINE THE DIFFERENT

TRANSACTIONS UNDER ACCRUALS.

INTUIT: PREDICT THE DIFFERENCE BETWEEN ACCRUALS AND DEFERRALS.FEEL: APPRECIATE THE EFFECTS OF ACCRUALS IN BUSINESS TRANSACTIONS.

DO: DETERMINE JOURNAL ENTRY OF ACCRUAL TRANSACTIONS.

COMMUNICATE: EXPRESS IN ORAL OR WRITTEN FORM THE DIFFERENCE OF

ACCRUALS AND DEFERRALS

LEAD: HELP OTHERS IN RECOGNIZING ACCRUAL TRANSACTIONS.

BE: FIND STRENGTH IN DETERMINING ACCRUALS IN BUSINESS TRANSACTIONS.

ACCRUALS

ACCRUALSACCRUALS

ACCRUALS There is a recognition

of revenue already earned and expense already incurred.

Conditions satisfied to record revenues or expenses, but money has not changed hands yet. Examples are accounts receivable and accounts payable.

•ACCRUED REVENUES

•ACCRUED EXPENSES

•ACCRUED REVENUES (ASSET)Revenue is recognized before

cash is received.

•ACCRUED EXPENSES (LIABILITY)Expense is recognized before

cash is paid.

EXAMPLES OF ACCRUALSACCRUED REVENUES

Accounts ReceivablesWork done or goods sold but the

customer did not pay yet or the company did not receive the cash yet..Accrued expenses

Accounts PayableExpenses incurred but we have not

yet paid the supplier.

HOW TO RECORD TRANSACTIONS

UNDER ACCRUALS

ACCRUED REVENUE:

Products are sold for P5,000 on May 1, 2011 and cash receive on May 10, 2011

May 1, 2011- Revenue is recognized.May 10, 2011- Cash is received.

Products are sold for P5,000 on May 1, 2011 and cash receive on May 10, 2011May 1, Accounts Receivable P5,0002011 Sales Revenue P5,000

May 10, Cash P5,0002011 Accounts Receivable P5,000

ACCRUED EXPENSESOn May 1, 2011, the Company A borrowed P100,000 from the bank and promised to pay 12% interest at the end of the month. The company paid the amount borrowed along the interest amount on June 30,2011.

May 1- Recognized the liability.May 31 and June 30- Recognized the Accrued Interest. June 30-Cash is paid.

On May 1, 2011, the Company A borrowed P100,000 from the bank and promised to pay 12% interest at the end of the month. The company paid the amount borrowed along the interest amount on June 30,2011.

May 1, Cash P100,0002011 Accounts Payable P100,000

On May 1, 2011, the Company A borrowed P100,000 from the bank and promised to pay 12% interest at the end of the month. The company paid the amount borrowed along the interest amount on June 30,2011

May 31, Interest Expense P9602011 Interest payable P960

June 30, Interest Expense P9602011 Interest payable P960

On May 1, 2011, the Company A borrowed P100,000 from the bank and promised to pay 12% interest at the end of the month. The company paid the amount borrowed along the interest amount on June 30,2011.

June 30, Accounts Payable P100,0002011 Interest Payable P 1,920

Cash P101,920

ACTIVITY

Accrued RevenueOn March 2,2011, the business rendered

services to their client worth P9,000. On March 19, the client paid P9,000 from the services.

On May 8, 2011, the business sold merchandise worth P5,500 and cash received on May 31, 2011.

On December 20, the company recorded their laundry services worth P3,000 and received cash on December 25,2011.

Accrued ExpensesFebruary 1,2011, your company

borrows P50,000 on a 6-month, 15% interest. Record the accrued interest after 6 months and the journal on the date of the transaction and on the date of payment.