THE POSTING PROCESS
Compilation of Data for Adjustments Depreciation Expense
o Property, Plant, & Equipment (PPE)
Process of gathering and putting together all
necessary information needed in adjusting of - Physical resources that are owned
account balances and used by the business which
are relatively fixed that have a long
useful life
- Are fixed assets
Cash Basis of Accounting - E.g., land, building, furniture &
Recognizes revenue when cash is fixtures, equipment, vehicles
RECEIVED
Recognizes expense when cash is PAID - NOT recorded as expense in the
E.g., cash rendered in 2018 will be treated year it was purchased
as 2019 revenue - Recorded as an asset
Expenses incurred in 2018 but disbursed in - a portion of the cost is recorded as
2019 an expense in each period of
There are NO NEED for adjusting in cash usefulness
basis - Depreciation Accounting:
process of allocating the
depreciable cost of a fixed asset
over its estimated useful life
Accrual Basis of Accounting
- Accumulated Depreciation:
Recognizes revenue when services are
accumulated amount of
PERFORMED
depreciation from the year of
Recognizes expense when they are
recognition to the latest balance
INCURRED
sheet
Does not matter if the amount is
received/paid
Adjusting entries are prepared to bring the
accounts up-to-date for activities that has Pro-forma (Latin: “for the sake of the form”) adjusting
taken place but hasn’t been recorded entry to take up depreciation of fixed asset follows:
Debit Credit
Dep. Exp.- (Name of Amount xxxx
Types of Adjusting Entries Asset)
Accumulated dep.- (Name of Asset) Amount xxxx
1. Depreciation of Property, Plant &
Equipment
o Systematic and rational allocation of Methods of Computing for Depreciation
fixed assets to the accounting period
benefited by its use Straight-Line Method
2. Uncollectible Accounts/Bad Debts A.D.E. = Annual Depreciation Expense
o Related to the business receivables CoA = Cost of Asset
which might not be collected E.R.V. = Estimated Rural Value (estimate of
3. Prepaid Expenses/Deferred Expenses what an asset will worth after its useful of life
o Expenses paid in advance consumption)
4. Unearned Revenues/Deferred Revenues E.U.L. = Estimated Useful Life (estimated
o Revenues collected in advance by the number of time periods a business enterprise
business can derive benefits from the asset)
5. Accrued Revenue N.B.V. = Net Book Value (price of asset after
o Revenue already earned by the deducting the E.R.V.
business but not yet collected/received CoA −E . R . V .
Formula; A . D. E=
6. Accrued Expense E .U . L .
o Expenses incurred but not yet paid
Ex.:
1. On April 1, 2018, ZARATE COMPUTER
CAFE purchased computer at a cost of ₱55,550
, THE POSTING PROCESS
with an estimated useful life of five (5) years and Debit Credit
had an estimated residual value of ₱10,550. Uncollectible Accounts Amount xxxx
CoA −E . R . V . Allowance for Uncollectible Accounts Amount xxxx
A . D. E= To record the annual allowance for doubtful accounts
E .U . L .
Php 55,550−Php 10,550
A . D. E= Methods of Computing for Bad Debts
5 yrs
Php 45,000 Percentage of Receivables
A . D. E=
5 yrs This method makes use of the amount of
A . D. E=₱ 9,000 Accounts Receivables in computing
The annual depreciation costs ₱9,000, meaning Historically identified based on the company’s
₱9,000 expense will take effect on April 1, 2019, experience
which will be written as: Ex.:
1. The general ledger of a company shows that its
04/01/19 Depr. Exp. – Comp Eq 9,000 Accounts Receivable account has a balance of
Accu. Dep. – Comp. Eq, 9,000 ₱53,200. Historically, an average of 9% of its
To record the annual depreciation receivable is uncollectible
of computer equipment
Accounts Receivable = ₱53,200
2. How much is the depreciation to be recorded if Less: Allowance for Bad Debts= 4,788
the end of accounting period is December 31,
2018?
ADE Net Realizable Value = ₱48,412
Monthly Depreciation Rate=
12 mos
₱53,200 * 9%(0.09) = ₱4,788 (estimated uncollectible)
9,000
MDR=
12 Our adjusting entries would be:
MDR=PHP 750.00 Bad Debts Expense 4,788
MDR × ( Num . of Months )=Depr .exp . Allowance for Bad Debts 4,788
750 ×9=6,750
2. If the company has a debit balance of ₱300 last
fiscal year, it should be added to the computed
12/31/19 Depr. Exp. – Comp Eq ₱6,750 bad debts:
Accu. Dep. – Comp. Eq, ₱6,750
To record the 9-month depreciation Computed Bad Debts = ₱4,788
of computer equipment Add: Debit Balance = 300
Total: Bad Debts = ₱5,088 (actual
uncollectible)
Bad Debts Expense The adjusting entries would be:
Bad Debts Expense 5,088
o Uncollectible/doubtful accounts relates
Allowance for Bad Debts 5,088
to the company’s receivables which
might not be collected
3. If the company has a credit balance of ₱428 last
o Also called as “Bad Debt”
fiscal year, it should be added to the computed
o Companies prepare adjusting entry to
bad debts:
recognize the anticipated loss the
business might incur Computed Bad Debts = ₱4,788
Add: Debit Balance = 428
Total: Bad Debts = ₱4,360 (actual
Pro-forma (Latin: “for the sake of the form”) adjusting uncollectible)
entry to take up depreciation of fixed asset follows: The adjusting entries would be:
Bad Debts Expense 4,360
Compilation of Data for Adjustments Depreciation Expense
o Property, Plant, & Equipment (PPE)
Process of gathering and putting together all
necessary information needed in adjusting of - Physical resources that are owned
account balances and used by the business which
are relatively fixed that have a long
useful life
- Are fixed assets
Cash Basis of Accounting - E.g., land, building, furniture &
Recognizes revenue when cash is fixtures, equipment, vehicles
RECEIVED
Recognizes expense when cash is PAID - NOT recorded as expense in the
E.g., cash rendered in 2018 will be treated year it was purchased
as 2019 revenue - Recorded as an asset
Expenses incurred in 2018 but disbursed in - a portion of the cost is recorded as
2019 an expense in each period of
There are NO NEED for adjusting in cash usefulness
basis - Depreciation Accounting:
process of allocating the
depreciable cost of a fixed asset
over its estimated useful life
Accrual Basis of Accounting
- Accumulated Depreciation:
Recognizes revenue when services are
accumulated amount of
PERFORMED
depreciation from the year of
Recognizes expense when they are
recognition to the latest balance
INCURRED
sheet
Does not matter if the amount is
received/paid
Adjusting entries are prepared to bring the
accounts up-to-date for activities that has Pro-forma (Latin: “for the sake of the form”) adjusting
taken place but hasn’t been recorded entry to take up depreciation of fixed asset follows:
Debit Credit
Dep. Exp.- (Name of Amount xxxx
Types of Adjusting Entries Asset)
Accumulated dep.- (Name of Asset) Amount xxxx
1. Depreciation of Property, Plant &
Equipment
o Systematic and rational allocation of Methods of Computing for Depreciation
fixed assets to the accounting period
benefited by its use Straight-Line Method
2. Uncollectible Accounts/Bad Debts A.D.E. = Annual Depreciation Expense
o Related to the business receivables CoA = Cost of Asset
which might not be collected E.R.V. = Estimated Rural Value (estimate of
3. Prepaid Expenses/Deferred Expenses what an asset will worth after its useful of life
o Expenses paid in advance consumption)
4. Unearned Revenues/Deferred Revenues E.U.L. = Estimated Useful Life (estimated
o Revenues collected in advance by the number of time periods a business enterprise
business can derive benefits from the asset)
5. Accrued Revenue N.B.V. = Net Book Value (price of asset after
o Revenue already earned by the deducting the E.R.V.
business but not yet collected/received CoA −E . R . V .
Formula; A . D. E=
6. Accrued Expense E .U . L .
o Expenses incurred but not yet paid
Ex.:
1. On April 1, 2018, ZARATE COMPUTER
CAFE purchased computer at a cost of ₱55,550
, THE POSTING PROCESS
with an estimated useful life of five (5) years and Debit Credit
had an estimated residual value of ₱10,550. Uncollectible Accounts Amount xxxx
CoA −E . R . V . Allowance for Uncollectible Accounts Amount xxxx
A . D. E= To record the annual allowance for doubtful accounts
E .U . L .
Php 55,550−Php 10,550
A . D. E= Methods of Computing for Bad Debts
5 yrs
Php 45,000 Percentage of Receivables
A . D. E=
5 yrs This method makes use of the amount of
A . D. E=₱ 9,000 Accounts Receivables in computing
The annual depreciation costs ₱9,000, meaning Historically identified based on the company’s
₱9,000 expense will take effect on April 1, 2019, experience
which will be written as: Ex.:
1. The general ledger of a company shows that its
04/01/19 Depr. Exp. – Comp Eq 9,000 Accounts Receivable account has a balance of
Accu. Dep. – Comp. Eq, 9,000 ₱53,200. Historically, an average of 9% of its
To record the annual depreciation receivable is uncollectible
of computer equipment
Accounts Receivable = ₱53,200
2. How much is the depreciation to be recorded if Less: Allowance for Bad Debts= 4,788
the end of accounting period is December 31,
2018?
ADE Net Realizable Value = ₱48,412
Monthly Depreciation Rate=
12 mos
₱53,200 * 9%(0.09) = ₱4,788 (estimated uncollectible)
9,000
MDR=
12 Our adjusting entries would be:
MDR=PHP 750.00 Bad Debts Expense 4,788
MDR × ( Num . of Months )=Depr .exp . Allowance for Bad Debts 4,788
750 ×9=6,750
2. If the company has a debit balance of ₱300 last
fiscal year, it should be added to the computed
12/31/19 Depr. Exp. – Comp Eq ₱6,750 bad debts:
Accu. Dep. – Comp. Eq, ₱6,750
To record the 9-month depreciation Computed Bad Debts = ₱4,788
of computer equipment Add: Debit Balance = 300
Total: Bad Debts = ₱5,088 (actual
uncollectible)
Bad Debts Expense The adjusting entries would be:
Bad Debts Expense 5,088
o Uncollectible/doubtful accounts relates
Allowance for Bad Debts 5,088
to the company’s receivables which
might not be collected
3. If the company has a credit balance of ₱428 last
o Also called as “Bad Debt”
fiscal year, it should be added to the computed
o Companies prepare adjusting entry to
bad debts:
recognize the anticipated loss the
business might incur Computed Bad Debts = ₱4,788
Add: Debit Balance = 428
Total: Bad Debts = ₱4,360 (actual
Pro-forma (Latin: “for the sake of the form”) adjusting uncollectible)
entry to take up depreciation of fixed asset follows: The adjusting entries would be:
Bad Debts Expense 4,360
