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1. This is the prescribed textbook for your course.
Available NOW at your campus bookstore!
 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a 1

2. Chapter 1
BALANCE DAY ADJUSTMENTS
LEARNING OUTCOME:
 TO REVISE GENERAL JOURNAL ENTRIES FOR
BALANCE DAY ADJUSTMENTS
© 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a
Applications for Financial Accounting by David Willis, 2
slides prepared by Kaye Watson

3. KEY TERMS
 accrued expenses
 accrued revenue
 balance date
 balance day adjustments
 balance day entries
 prepaid expenses
 revenue in advance
 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a 3

4. THE ACCRUAL CONCEPT
 Assumes that transactions are recorded in
the period when revenue is earned and
expenses are incurred
NOT
 When the cash is received and expenses
are paid
 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a 4

5. TYPES OF BALANCE DAY
ADJUSTMENTS
1. Accrued revenue  Revenue earned but
not yet received
2. Accrued expenses
 Expenses incurred but
not yet paid
3. Revenue in advance
 Revenue received but
4. Prepaid expenses not yet earned
 Expenses paid but not
yet incurred
 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a 5

6. TYPES OF BALANCE DAY
ACCOUNTS
1. Asset account  Accrued revenue
(DEBIT)  Prepaid expenses
2. Liability account  Revenue in advance
(CREDIT)
 Accrued expenses
 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a 6

7. EXAMPLE
 Accrued revenue
Commission is due to be paid in July on a property
sold in June
General Journal
Date Details Debit Credit
($) ($)
30 June Accrued revenue 4000
Commission revenue 4000
Commission accrued
but not yet received
 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a 7

8. EXAMPLE
 Prepaid expenses
Insurance expense account includes an amount of
$3000 which relates to July, August and September in
the next financial year
General Journal
Date Details Debit Credit
($) ($)
30 June Prepaid expenses 3000
Insurance expense 3000
Prepaid insurance
expense
 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a 8

9. EXAMPLE
 Accrued expenses
Wages to be paid in July include $1000 for employees
who worked on 29 June.
General Journal
Date Details Debit Credit
($) ($)
30 June Wage expense 1000
Accrued wages 1000
Wages accrued
 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a 9

10. EXAMPLE
 Revenue received in advance
Fees received in June included a deposit of $2000 for
a project starting in August
General Journal
Date Details Debit Credit
($) ($)
30 June Fee revenue 2000
Revenue received in 2000
advance
Deposit on project
 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a 10

11. BALANCE DAY ADJUSTMENTS AFFECT
STATEMENT OF FINANCIAL POSITION
Prepaid
DEBIT ASSET
expense
Accrued STATEMENT
DEBIT ASSET
revenue OF FINANCIAL
Accrued POSITION AT
CREDIT LIABILITY
expense JUNE 30
Revenue
CREDIT LIABILITY
in advance
 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a 11

12. OTHER BALANCE DAY
ENTRIES
 Closing inventories
 Bad and doubtful debts
 Depreciation
 Provision for annual leave
 Provision for long service leave
 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a 12