Grade 11 Accounting - Chapter Nine

Depreciation Assignment Grade 11 Accounting ~ Chapter Nine - What is depreciation? What is another word for depreciation? The concept of depreciation means to spread out the cost of an asset over its estimated useful life. Often referred to as ‘Amortization’. - What is the accumulated depreciation account? Which financial statement is it in? Accumulated depreciation is an account that is used to record the amount of total depreciation for a specific long-term asset. It is a contra account - it will show the total depreciation for the asset as well as allow for the true value of the asset to be displayed. The normal balance would be credit. Accumulated depreciation is also a permanent account (not closed at the end of the year). Depreciation Expense Accumulated Depreciation (Asset) - DR $$$$ CR $$$$ Why do we have to do adjusting entries? Adjustments must be done on these assets to represent their current value - these adjustments are referred to as depreciation. Leaving these things undone can save time, effort, and money. However, at statement time, the omissions must be accountable for. If accounts are not adjusted at this time, a correct net income or loss cannot be determined. - What is unearned revenue? Unearned revenue is a liability account that reports amounts received in advance of providing goods or services. It’s a liability because you have received money for work that you have not done (you still owe them your time). Depreciation Assignment 1. What is a late-arriving invoice? If you receive late bills for items that you purchased during the fiscal period, you still need to account for them. This is called a late-arriving invoice. 2. How do we adjust for supplies in the journal? During the accounting period, the balance of supplies account represents the balance at the beginning of the period plus the cost of any new supplies purchased. Dec.31 Supplies Expense Supplies - Adjusting for supplies used DR 1 500 CR 1 500 3. Give examples of 3 types of assets that depreciate over time. ● company vehicles, equipment, furniture 4. Why do you do closing entries? We do closing entries to clear out the revenues, expenses, and drawings - set them as zero for the beginning of the next fiscal period. 5. What accounts get closed? Revenues, Expenses, and Drawings. 6. When do we do closing entries? ● Closing entries transfer the balances from the temporary accounts to a permanent or real account at the end of the accounting year. As a result, the temporary accounts will begin the following accounting year with zero balances. 7. What is the income summary account? The income summary account summarizes the revenue/expenses for the period and clears out the accounts during the closing process. (Remember - you need to make it balance 0) Depreciation Assignment 8. What is the formula to calculate depreciation? Original Cost - Salvage Number Number of years 9. What is salvage value? ● salvage value is an estimate of what the asset could be sold for at the end of its useful life 10. What is the post-closing trial balance? What goes on it? After you close the nominal accounts (Revenues, Expenses, and Drawings) you need to create a trial balance to make sure the ledger is in balance. 11. What is a prepaid expense? Give an example. A prepaid expense is an item paid for in advance but one where the benefits extend to the future. For example; gym memberships, professional fees, licenses, car insurance. 12. What is the matching principle? ● The matching principle directs a company to report an expense on its income statement in the period in which the related revenues are earned 13. When do we do adjusting entries? ● An adjusting journal entry is typically made just prior to issuing a company's financial statements 14. When do we use the income summary account? ● the income summary statement summarizes the revenue/expenses for the period and clears out the accounts during the closing processes lena was here <3