Location via proxy:   [ UP ]  
[Report a bug]   [Manage cookies]                
Scribd Logo
Upload

Welcome to Scribd!

  • 22 views

    Transactions Account Debited Credited

    Uploaded by

    H O P E
    1. The document lists 10 accounting transactions with descriptions of potential errors and the proper accounting treatment. 2. Transaction 1 may be in error if the leasehold improvement amount did not exceed capitalization limits and added value, as it should be capitalized rather than expensed. 3. Transaction 5 is in error, as obsolete inventory should be written off rather than retained at cost. 4. Transaction 10 is also in error, as an increase in asset value should be recorded to a revaluation surplus account rather than directly increasing the asset value.

    Copyright:

    © All Rights Reserved

    Transactions Account Debited Credited

    Uploaded by

    H O P E
    22 views8 pages
    1. The document lists 10 accounting transactions with descriptions of potential errors and the proper accounting treatment. 2. Transaction 1 may be in error if the leasehold improvement amount did not exceed capitalization limits and added value, as it should be capitalized rather than expensed. 3. Transaction 5 is in error, as obsolete inventory should be written off rather than retained at cost. 4. Transaction 10 is also in error, as an increase in asset value should be recorded to a revaluation surplus account rather than directly increasing the asset value.

    Original Description:

    Asd

    Original Title

    123

    Copyright

    © © All Rights Reserved

    Did you find this document useful?

    Is this content inappropriate?

    1. The document lists 10 accounting transactions with descriptions of potential errors and the proper accounting treatment. 2. Transaction 1 may be in error if the leasehold improvement amount did not exceed capitalization limits and added value, as it should be capitalized rather than expensed. 3. Transaction 5 is in error, as obsolete inventory should be written off rather than retained at cost. 4. Transaction 10 is also in error, as an increase in asset value should be recorded to a revaluation surplus account rather than directly increasing the asset value.

    Copyright:

    © All Rights Reserved
    22 views8 pages

    Transactions Account Debited Credited

    Uploaded by

    H O P E
    1. The document lists 10 accounting transactions with descriptions of potential errors and the proper accounting treatment. 2. Transaction 1 may be in error if the leasehold improvement amount did not exceed capitalization limits and added value, as it should be capitalized rather than expensed. 3. Transaction 5 is in error, as obsolete inventory should be written off rather than retained at cost. 4. Transaction 10 is also in error, as an increase in asset value should be recorded to a revaluation surplus account rather than directly increasing the asset value.

    Copyright:

    © All Rights Reserved
    of 8

    Name of Team Members: 1.

    2.
    3.
    4.
    ACCOUNT
    TRANSACTIONS
    DEBITED CREDITED

    1. The entire cost of leasehold improvement is to be


    Leasehold Expenses Cash
    charged to an expense account.

    2. An account receivable for Php 30,000 is carried with a


    customer who has not been seen for about a year. The Bad Debt Expense Accounts Receivable
    account is expensed.

    3. The company has paid Php 300,000 for an advertising


    campaign to promote a new product that will be placed
    Prepaid Advertising Cash
    on the market for the following year. The expenditure is
    charged to prepaid advertising.

    4. The cash surrender value of life insurance with a


    balance of Php 60,000 is reported as a loss since the
    Loss in Life Insurance Life Insurance
    company does not expect to make any claim on the
    policy until maturity.

    5. Goods that cost Php 150,000 have become obsolete.


    The goods are included as part of the inventory at Php
    Inventory-Ending Income Summary
    150,000 since no loss can be realized until the goods
    are sold.

    6. The Company acquired another company and pays


    Php 500,000 in excess of tangible and intangible
    Acquisition Loss &
    identifiable assets because of the exceptionally high Cash
    Acquired Asset Accounts
    earnings of the acquired company. The excess payment
    is charged to a loss account.
    7. Inasmuch as profit for the year appears to be
    extremely small, no depreciation is recorded as an none none
    expense for the current year.

    8. A fire destroyed a considerable amount of uninsured


    inventory. No entry is made because the ending
    inventory will of course be reduced by the amount of
    none none
    destroyed merchandise, so that its cost will be included
    in the cost of goods sold and the net income figure will
    be correct.

    9. The company operates a canteen for the convenience Cash/AR Sales


    of its employees. Sales made by the canteen are
    credited to the regular sales account for product sales. Purchases Cash
    Food purchased and salaries paid for the canteen
    operations are recorded in the regular purchases and
    payroll accounts. Salaries Expense Cash

    10. A building purchased by the company 5 years ago at


    Php 3,000,000 including the land on which it stands, can
    now be sold for Php 5,000,000. The accountant instructs Building Owners Capital
    that the new values of Php 5,000,000 be entered into
    the accounts.
    Legend: 1
    2
    3

    Conformed/Violated Accounting Principles Effects of Error(s) (if a


    Descriptions of Error (if any)
    & Concepts (if any), why? ASSETS

    It depends. If the amount did not


    exceed the capitalization limit of the
    company or the improvement did
    Leasehold improvement should be recorded as a
    not add value to the property, the
    fiixed asset rather than outright expense. Due to
    charging to expense is correct.
    the outright expense of the improvement, the
    However, if the amount exceeded 2
    amount will not be capitalized and amortize over
    the capitalization limit or added
    the shorter between the leasehold improvement's
    value to the property, the amount
    useful life and the lease term.
    should be capitalized and amortized
    over its remaining useful life or
    remaning term of lease

    Matching principle. Companies must estimate


    their bad debt expense in the year when the credit
    sales were made.It is a common practice to write-
    n/a off a bad debt when the debt remain unpaid for
    more than 90 days. Since the example did not
    show an allowance for doubtful account, the direct
    write-off method is correctly used.

    Paid rights to receive future services shall be


    recorded as an asset rather than an outright
    n/a
    expense, be it an isurance, rent, or
    advvertisements.

    The comany shall still record cash Cash surrender value is treated as an other asset
    surrender value even havin no plans which comes from a portion of insurance 2
    to make any claim until maturity payments.

    The cost of inventory shall be recognized,


    Obsolete goods shall be written-off. subsequently, at LCNRV. Since the goods is 1
    already deemed obselete, this shall be written-off

    A goodwill shall be recognized when a company


    The excess payment shall be
    paid a premium price over the fair market value of 2
    recorded as goodwill.
    the net asset of the purchased company.
    Matching Principle. Expenses shall be recorded
    in the same period in which revenue is earned
    Regardless whether the business
    from them. Hence, the cost of asset that is spread
    incur profit or loss, depreciation 1
    over the years wherein the asset is useable should
    shall be recorded
    be matched with the revenues earned by using the
    asset.

    When a company determines that its inventory are


    Cost of destroyed inventory due to no longer fits to be sold, the company must
    fire should be accounted for as loss, remove the inventory on its book. The company 1
    hence, writing the inventory off. should write off the asset and record expense
    instead.

    n/a

    If a revaluation results in an increase in value, it


    should be credited to other comprehensive
    The increase in value should be inncome and accumulated in eequity under thhe
    credited to revaluation surplus. heading "revalation surplus" unless it represents
    1
    Also, only increase should be posted the reversal of a revaluation decrease of the same
    instead of the whole new valuation asset previously recognised as an expense, in
    which case it should be recognised in profit or
    loss.
    Overstated Legend: 1 Increase
    Understated 2 Decrease
    No Effect 3 No Effect

    Effects of Error(s) (if any) to Company's… Real/Correct Effects of Transaction to Company's…


    LIABILITIES EQUITY REVENUE EXPENSES ASSETS LIABILITIES EQUITY REVENUE

    3 3 3 1 3 3 3 3

    2 3 3 3

    3 3 3 3

    3 3 3 1 1 3 3 3

    3 1 3 2 2 3 2 3

    3 3 1 3 3 3 3 3
    3 3 1 2 2 3 3 2

    3 3 3 2 2 3 3 3

    1 3 1 1

    3 1 2 2 2 3 2 1
    tion to Company's…
    EXPENSES

    3
    1

    You might also like