Hello, This lecture will take a look at a problem that will be very similar to the homework the numbers will change the format will remain that much the same, we got the two objective objectives here of working these types of problems, one to be learning the accounting concepts to to be understanding the Excel and learn some basic formulas within Excel. Remember, this is really the place where you're going to get most of your Excel 90% of what you use Excel for here. Then you want to pick up some more tips and tricks within an Excel class to make your Excel sheets more presentable and use some more advanced type of functions. So we're going to do the adjusting process. Again. Here, we take a look at our worksheet, we're saying that our accounting equation, assets equal liabilities plus owner's equity is up top, we can see that we have the unadjusted trial balance right there.

And that represents assets and green liabilities in orange, and then we have equity and the income statement, income and all the Expense Type accounts. This account is blue to distinguish the difference between the cutoff between the balance sheet accounts up top, the income statement accounts below, we are in the adjusting process. So we're going to call this one the unadjusted trial balance. And remember where we are at at this point in time is that the accounting department has now entered all the information for the month or a year. Now as before we close out the year before we create the financial statements, we're going to make any adjustments we need to do as of the cutoff date. So in the adjusting process, the adjusting department, we are now going to make these adjusting entries.

Once again the accounting department hasn't made any errors necessarily, in order for the adjusting department to still need to make adjustments. These are accounts that generally always need to be made adjusted as of the cutoff date, because it's not practical to do it beforehand. So we have the unadjusted trial balance where all the transactions have been entered. We will then make our adjusting entries in this column. Then we will have our adjusted trial balance there. That's the one that we will then use to create the financial statements.

So we will take these transactions the adjust these adjustments here, then we'll post those journal entries or record those journal entries right here. Then we will post those journal entries into the adjusting column, we can use this worksheet to do any calculations that may need doing. Remember that the normal rules for journal entries being that there's going to be two accounts for every journal entry and every journal entry is gonna have an equal number of debits and credits still applies. For only the adjusting journal entries. We also have the rule that we're generally going to have one balance sheet account above the blue line not including cash, we're not going to be using cash in the adjusting process for the most part, and we're going to have one income statement account below the blue line. And we already know that the income statement accounts only go up.

So if you apply that rule to the adjusting process, then we can often see which way the accounts will be going debited or credited without knowing more Else, then we'll have to analyze the rest of it. So that's where we will start. So we have, as of the cutoff date, at the end of the time period in this case has been done. work has been done for which an invoice has not yet been sent out. The invoice was sent out in the following month, but the work was done before the cutoff date. So what we're saying is, as of the cutoff date, the end of the year or the end of the month, the invoice was not sent out, it was sent out next month, so but the work was done this month.

Why would that happen? Well, if it was a service company or something like that, then we're going to have to add up the time, make the invoice and send it out. It could will happen that happened after the cutoff date after the cutoff date in which the work was done. So that wouldn't generally be a problem but for the most part, except that we want to be on a perfect accrual basis as of the cutoff date being the end of the month or the year. So therefore, we're going to pull that invoice. back into this time period.

So that means that when an invoice is created, what's usually the accounts that will be affected? What will be the balance sheet accounts up top? Usually it's going to be accounts receivable unless we did it for cash, but usually it's going to be accounts receivable. So we're going to right click, I'm going to make that green indicating that's one of the accounts that will be affected the account below here. What's the account affected when we send out an invoice? Usually revenue, we earned revenue.

So I'm gonna right click, I'm gonna make that green. And we can see that the revenue account is an income statement account below the blue line are in it generally only goes up. So how do we make revenue go up? Well, it has a credit balance, we're going to make it go up by doing the same thing to it, which in this case is another credit. So I'm going to right click, I'm going to copy that. I'm going to put it on the bottom under a put it on the bottom because credits generally go on the bottom.

Then if the only other account is affected is receivable. I'm going to copy that and I'm going to put it on Top. Now this this entry is one of the ones that are more confusing actually sometimes for the adjusting process because of the fact that this is such a normal journal entry that we do through the accounting process. So once again, the reason why it would be here on the adjusting process is simply a timing difference, meaning the invoice did go out the account appointment, did send the invoice, but they sent it after the cutoff date. So now we're pulling it back in to this timeframe. So what's the amount going to be, it's just going to be the amount of the invoice in this case 4900.

So we're going to increase receivables 4900, and we're going to increase revenue by 4900. Like so. And then we'll just post this out just as we would if we were creating an invoice and we're going to go to h six. I'm going to say equals and then we're going to point to that four, nine, this is a debit that's a debit that's going to make this go up in the debit direction to 36 nine. We're now out of balance. Bye A four nine will then post the revenue down here.

So I'm in cell h 16, we're gonna say that equals, we can then point to the credit, this is a credit, that's a credit that's gonna make the credits go up in the credit direction, put back in balance, make net income go up. So net incomes going up, that's calculated by the credits minus the debit, revenue went up, therefore, net income went up in the credit direction. Next transaction, so I'm going to unhighlight these so we can take a look at the second transaction in the same type of way. We have depreciation expense for the period is 1100. Now once again, before we even know what depreciation is, we could just figure out which accounts will be affected and go from there. So what will be the balance sheet account related to depreciation?

If we look through it, we see depreciation in this account. So accumulated depreciation might be one that would be affected. If we look on the income statement, what account has depreciation? Well, we see depreciation expense, so it's actually an income or expense account, those are the accounts in the income statement. In this case, it's going to be an expense account. And we know that expense accounts only go one way they go up.

So these are all debit balance accounts because their expenses, and they're going to go up, how do we make something go up, we do the same thing to it, which in this case would be another debit. So this expense account, I'm going to assume is a debit. So I'm going to put that on top. And if that's the debit, and this is the only other account affected, it must be a credit. So I'm going to copy that. We're going to put that on the bottom.

So once again, we can know which accounts are going to be debited and credited if we can figure out which accounts are going to be affected without even really knowing what's going on. Now let's try to think about what's going on. So what is accumulated depreciation. accumulated depreciation is going to relate to some type of property, plant and equipment in this case equipment up here. So in this transaction, we can see that the equipment was purchased for 135 three, we purchased it for 130 5300 It could be multiple pieces of equipment.