FA16 - Adjusted Trial Balance

Summary

This video script outlines the process of transferring adjusting journal entries into an adjusted trial balance. The presenter demonstrates how to accurately input figures, ensuring debits and credits match, and explains the importance of this step for preparing financial statements. A humorous incident involving a spilled drink adds a personal touch to the tutorial.

Takeaways

• 📝 The process involves transferring adjusting journal entries into an adjusted trial balance.
• 💻 The speaker uses a computer to copy journal entries from part one.
• 🔍 A quick behind-the-scenes moment is shared where a drink accident occurred during filming.
• 📉 Debit and credit entries are carefully transferred to the adjusted trial balance columns.
• 🧮 The importance of accuracy is emphasized, with a reminder to stop if the totals do not match.
• 🔄 Adjustments are made by adding or subtracting the adjusting amounts from the unadjusted balances.
• 📉 The adjusted trial balance is used to ensure that debits and credits still balance.
• 📋 The speaker demonstrates how to calculate the new balances after adjustments.
• 📊 The final step is to total up all the columns to confirm that the adjusted trial balance is correct.
• 📈 The adjusted trial balance is crucial for preparing accurate financial statements.

Q & A

What is the purpose of adjusting journal entries?

Adjusting journal entries are used to update the accounts in the general ledger to reflect the current status of assets, liabilities, revenues, and expenses. This ensures that the financial statements accurately represent the financial position of a company at a specific point in time.

What is an adjusted trial balance?

An adjusted trial balance is a list of all accounts with their balances after adjusting entries have been posted. It is used to ensure that the total debits equal the total credits, which is a fundamental accounting equation.

Why is it important to ensure that debits and credits are equal in the adjusted trial balance?

Ensuring that debits and credits are equal is crucial because it confirms that all transactions have been recorded correctly and that there are no errors in the accounting process. This equality is a basic principle of double-entry bookkeeping.

What does the term 'transposing numbers' mean in the context of the script?

Transposing numbers refers to the mistake of swapping the positions of two digits when entering them, which can lead to incorrect financial records.

Why did the speaker mention the importance of being careful and taking time when transferring numbers?

The speaker emphasized the importance of being careful and taking time to avoid mistakes such as transposing numbers or incorrectly categorizing debits and credits, which could lead to an imbalance in the adjusted trial balance.

What is the significance of the number $4,700 mentioned in the script?

The number $4,700 represents the debit balance for Supplies Expense and the credit balance for Supplies, indicating the cost of supplies used during the period.

How does the speaker handle the situation where they have to add an additional credit to an existing credit in the trial balance?

The speaker plans to add the additional credit of $4,000 to the existing credit of $10,000 in the Security Revenue cell, acknowledging that they will have two credits to account for.

What does the speaker mean by 'the big side gets the balance'?

The speaker is referring to the practice of taking the larger of two amounts (debit or credit) and using that to determine the final balance for an account in the adjusted trial balance.

Why is it necessary to add the unadjusted and adjusted balances together for certain accounts?

It is necessary to add the unadjusted and adjusted balances together for certain accounts to reflect the true financial position of the company, taking into account any changes that occurred during the accounting period.

What is the final step the speaker mentions before preparing financial statements?

The final step mentioned is totaling up both the debit and credit columns in the adjusted trial balance to ensure they match, which indicates that the financial statements will be accurate.

Why did the speaker mention the date June 30th in relation to the supplies count?

The speaker mentioned June 30th because it is the end of the accounting period, and the supplies count of $300 reflects the physical count of supplies on hand at that date, which should match the accounting records.

Outlines

00:00

📝 Adjusting Journal Entries to Adjusted Trial Balance

The speaker begins by discussing the completion of adjusting journal entries and the process of transferring these entries into an adjusted trial balance. They mention the ease of using a computer to copy journal entries and the importance of accuracy. The speaker humorously shares a personal mishap where a drink exploded, causing a mess. Despite this, they continue with the task of entering numbers from the journal entries into the adjusted trial balance, ensuring debits and credits are correctly matched. They provide a step-by-step guide on how to fill in the trial balance, including how to handle adjustments such as supplies expense, insurance expense, and depreciation. The speaker emphasizes the need to double-check the totals to ensure they match, which is crucial for the accuracy of financial statements.

05:01

🔍 Finalizing the Adjusted Trial Balance

In the second paragraph, the speaker continues the process of preparing the adjusted trial balance. They explain how to calculate the balances for various accounts by subtracting the adjustment amounts from the unadjusted balances, ensuring the correct side of the ledger is credited or debited. The speaker provides specific examples, such as calculating the new balance for supplies and prepaid insurance. They also mention the importance of ensuring the totals on both sides of the trial balance match, which is a sign of correct data entry. The speaker concludes by stating that with the adjusted trial balance complete, they are ready to move on to preparing financial statements in the next video.

Keywords

💡Adjusting Journal Entries

Adjusting journal entries are accounting entries made at the end of an accounting period to adjust revenues and expenses to reflect the actual financial performance of a company. They ensure that the company's financial statements accurately represent its financial position. In the video, the speaker discusses how to transfer these entries into the adjusted trial balance, demonstrating the practical application of this concept.

💡Adjusted Trial Balance

An adjusted trial balance is a list of all accounts with their respective debit and credit balances after all adjusting entries have been posted. It serves as a foundation for preparing financial statements. The video script describes the process of creating an adjusted trial balance by incorporating the adjusting journal entries, which is central to the theme of accurately reflecting a company's financial status.

💡Debit

In accounting, a debit is an entry on the left side of an account that either increases an asset or expense, or decreases a liability, equity, or revenue. The video script mentions several instances where debits are used, such as 'debit supplies expense' and 'debit salaries expense,' to illustrate the process of recording financial transactions.

💡Credit

A credit in accounting is an entry on the right side of an account that either increases a liability, equity, or revenue, or decreases an asset or expense. The script provides examples of credits, like 'credit supplies' and 'credit prepaid insurance,' to show how they counterbalance debits in the adjusted trial balance.

💡Supplies Expense

Supplies expense is the cost of materials and items used in the operations of a business that are not capital assets. In the script, the speaker discusses adjusting the supplies account by debiting supplies expense and crediting the supplies account, which is crucial for accurately calculating the cost of goods used during the period.

💡Prepaid Insurance

Prepaid insurance refers to the amount a company has paid in advance for insurance coverage that will be used over a period of time. The video script includes an example of adjusting prepaid insurance by debiting insurance expense and crediting prepaid insurance, which is necessary to match the expense with the period it benefits.

💡Depreciation Expense

Depreciation expense is the allocation of the cost of a tangible asset over its useful life, which is a way to spread out the cost of assets that are used over multiple accounting periods. The script describes how to record depreciation expense by debiting the expense and crediting accumulated depreciation, which reflects the wear and tear of assets.

💡Interest Expense

Interest expense is the cost of borrowing money, which is an expense recognized on the income statement. The video script includes an example of recording interest expense by debiting the expense and crediting interest payable, which is important for financial statement preparation to show the cost of debt.

💡Unearned Revenue

Unearned revenue, also known as deferred revenue, is revenue received in advance for goods or services that have not yet been delivered. The script discusses adjusting unearned security revenue by debiting the revenue and crediting the unearned revenue account, which is essential for revenue recognition when the goods or services are actually provided.

💡Accumulated Depreciation

Accumulated depreciation is the total amount of depreciation that has been expensed against an asset since it was first used. The video script mentions this term in the context of adjusting the depreciation expense, which is necessary to reduce the carrying value of the asset over time.

💡Retained Earnings

Retained earnings are the cumulative net income or profit of a company that has been reinvested in the business rather than paid out to shareholders as dividends. The script refers to retained earnings as part of the adjusted trial balance, which is a key component in understanding the company's financial performance over time.

Highlights

Completing adjusting journal entries and moving on to the adjusted trial balance.

Efficiently transferring journal entries from part one to the adjusted trial balance on a computer.

The importance of careful and meticulous entry of numbers into the adjusted trial balance.

Incorporating debits and credits for supplies expense and supplies asset accounts.

Recording insurance expense and prepaid insurance with accurate debits and credits.

Handling depreciation expense and accumulated depreciation for computers correctly.

Managing interest expense and interest payable with precision.

Adjusting unearned security revenue with attention to detail.

Ensuring the balance of debits and credits in the adjusted trial balance matches.

The process of adding unadjusted and adjusted figures to derive the final balances.

Verifying the balance of supplies on hand with the accounting records.

Calculating the balance for prepaid insurance after adjustments.

Confirming the accuracy of the adjusted trial balance by matching debits and credits.

Preparing for financial statements with a correctly adjusted trial balance.

The significance of the adjusted trial balance in ensuring the accuracy of financial statements.

Looking ahead to preparing financial statements in the next video.

Transcripts

oK we've just completed our adjusting

journal entries it's time to move on and

put those adjusting journal entries into

our adjusted trial balance

I've removed everything just it's easy

enough on a computer I've just copied up

all of my journal entries from part one

and we're just gonna transfer those

numbers into the adjusted trial balance

column I just want to give you a quick

look behind the curtain here when I

finish a video and I start the next one

I just start right away I just go okay

stop

start and the reason I stopped is if I

make a mistake or something like that

but I always take a drink in between and

if you notice something let's see how do

I go full screen that's it that's my

full screen a coke just exploded all

over my shirts so if you're noticing I

look a little bit off or you're seeing

the stain that's what happened I was

just taking a drink and I don't know

what happened it just went everywhere

all over my computer all over my shirt

so hopefully we all can cope with that

okay

so our first job here and preparing our

adjusted trial balance is literally just

to write these numbers in here literally

I'm trying not to say that word anymore

debit supplies expense credit supplies

so I'm going to literally find the word

supplies expense there it is and under

the debit side I write $4,700

I credit supplies and supplies is under

assets there it is 4700 debit insurance

expense credit prepaid insurance 9333 so

I find my insurance expense somewhere in

the expenses there it is nine three

three three and I credit prepaid

insurance nine three three three so a

little bit painstaking you just got to

be careful take your time here

debit depreciation expense 21400 credit

accumulated depreciation Computers 21400

debit interest expense credit interest

payable twelve fifty there's my interest

expense

there's my interest payable oops almost

at twenty one fifth

the good way to mess up a problem just

transpose two numbers debit unearned

Security revenue credit Security revenue

10,000 debit unearned Security revenue

10,000 now I know and we've seen this

that when we did our journal entries we

actually credit security revenue twice

we credited here and then in journal

entry t so I either gonna make room in

the cell for it or just know that okay I

got 10,000 credit and a four thousand

credit so when I go to my security

revenue cell on this spreadsheet or

whatever you want to call it I can just

put 10,000 and I'm gonna squeeze it over

to the left cuz I know I got another

4,000 coming that I'm gonna add in in

just a minute so that's what I'll do

here

David salaries expense credit salaries

payable 1,500 whose expense 1500

salaries payable 1500 debe de our credit

security revenue 4000 there's my AR 4000

my security revenue I just add in 4,000

if I just written 14,000 in that cell

that's totally fine okay so we've done

the first part here we just have to add

up both columns and make sure things

work four thousand plus ten thousand

plus fifteen hundred plus twelve fifty

plus twenty one thousand four hundred

plus forty seven hundred plus 93 33 five

two one eight three five two one eight

three double underline there and let's

add up the other side forty-seven

hundred plus 93 plus 21 4 plus 1500 plus

twelve fifty plus ten thousand plus four

thousand so I had fourteen thousand five

two one eight three my two sides do

indeed match that's good news if they

didn't match I would stop here because

of course all my journal entries the

debits equal the credits and this is

just try

from the journal entry so I would have

transferred something wrong maybe I put

something in the debit side that should

have been a credit or vice-versa

or maybe I transposed a number but this

has to add up and if it doesn't add up

stop like stop you've made a mistake

okay

moving over to the adjusted trial

balance now with this row we just add

our unadjusted plus our adjustments so

cash 38 grand debit there's no

adjustment so it ends as a 38 grand

debit accounts receivable 12,000 and I

debit that 4,000 so if I've to debits

add them together 12 plus 4 is 16 with

supplies I've got a debit of five and I

adjust a credit of 4,700 so I take the

big one the five minus the smaller one

4,700 cuz I got a debit and a credit 5 -

4,700 is 300 the big side gets the

balance and that number is familiar to

me if we look down at the problem you

can see a count of supplies reals 300

were on hand on June 30th well guess

what today is June 30th and our

accounting records show $300 of supplies

as they should so that's good news

prepaid insurance 28,000 and 9333 I got

a debit of 28 a crediting to have to use

the calculator for this 28,000 debit -

9333 the big one - the small one I get

18 667 on the debit side here 18 667

computers 214,000 there it is ad

computers 46 plus 21 is 67 thousand four

hundred accounts payable eight thousand

it remains a credit salaries payable

credit of 1500 interest payable a credit

of 1250 honor in Security revenue it's a

credit of 15 a debit of 10 the big side

is the credits of 15 minus 10 is 5 and

the credit side gets it the credit side

was the bigger the two this one soon

screw up sometimes they go 15 minus 10

and they get credit of 25 somehow or

they get some funny numbers here for

whatever reason credit uh no

payable 30,000 it was unadjusted common

shares unadjusted retained earnings

unadjusted dividends unadjusted security

revenue 45 credit and 14 is our

adjustments credit so 40 85 and 14 is

$4.99 credit 320 debit and 1500 debit is

321 oops I'm in the wrong column there

321 500 debit interest expense 1250

debit depreciation expense

21400 debit 4700 debit for supplies

$17,000 for repair expense 9333 for

insurance expense 60,000 for rent

expense and 7000 for income tax expense

and at that point we are ready to rock

here let's total everything up so

totaling the left side 38 thousand plus

16 thousand plus 300 plus 18 6 6 7 plus

2 1400 plus 10,000 plus 3 21 500 plus 12

50 plus 21 4 that's 47 hundred plus 17

thousand plus 93 33 plus 60,000 plus

7000 and I get 739 157 three nine one

five last column here 67 thousand four

hundred plus eight thousand plus 1500

plus twelve fifty plus five thousand

plus thirty thousand plus 40 thousand

plus eighty seven thousand plus 4 9 900

739 one five

see they do match hoof that means when I

go to prepare financial statements my

financial statements are going to work

did technically we should put dollar

signs at the top of each column and

beside the bottom lines on both the

adjustments section and the adjusted

trial balance section but at that point

we have prepared ourselves a very nice

adjusted trial balance in our next video

we're gonna look at the financial

statements stay tuned