4b4e38a4-1395-415d-94fd-3fc7bb2ec59f - Lecture & Workshop 3 RFCC.mp4

LECTURER: Ok, hello everyone.

Welcome again to the Accounting
and Governance class.

Could anyone please tell me
if the volume is ok?

Perfect. Ok, thank you.
Thank you.

Still, I hope you have had
a very good week,

and I hope that you will do well
in your first accessible homework

that is in the process of marking

by another lecturer,
that is the person who will mark

all our assessment.

So just be a bit patient,
during this week we will release

the results of the first
accessible homework.

Now today we will continue
with what we started last week.

Last week what you learnt
was how to record transaction

using debits and credits
and preparing the journal entries

and you know that for
each journal entry

you need at least one debit entry
and one credit entry.

it could be more than two,
but normally we have one debit

and of course the total debit
and total credit should be the same,

the same amount in each journal entry.

So what we will go through today
another type of entries

which is adjusting entries.

I hope you have studied the
material that is posted

on the course learning agreement,
you have watched the videos

and looked at the PowerPoint too
and have of course understanding of this.

But as usual I will explain everything
you need to understand well,

how to deal with these
different types of entries

that are the adjusting entries.

The purpose of this session
is that you will end the session

with a clear understanding of that,
adjusting entries and also closing entries

which is another type of entry.

The journal entries that you
learnt last week

are entries that you prepare from
transactions that you have in the business

so when the accountant
records these transactions

the accountant receives information
that is mainly through the cash received

and cash paid so they are
very based on the cash.

Cash received and cash paid.

I will answer that they...

They are mainly related to
cash received and cash paid

but sometimes the accountant also receives
information of invoices

that are sent to customers so they record
an income or revenue and purchases

so they record the purchase as well.

So not all are cash journal entries
but most of the I would say yes.

The first difference in adjusting entries
is in adjusting entries,

we do not involve cash.

Cash is never involved
in an adjusting entry.

So what are these adjusting entries?

And in this I will answer what they do.

Why adjustments are not done each month
as a normal activity

then it will not be such a big adjustment
and you are totally correct here.

But that depends...

it depends on what is
our accounting period.

It depends on the company.

The normal accounting period
is one year.

If a company does not prepare
financial statements every month

for example, or every quarter,
well, it will happen what you said.

The adjusting entries are
at the end of the year.

But what's happening there
in the real world

companies prepare the financial statement
every quarter or even every month

and in that case if we define the
accounting period as one month

that means at the end of the month
we need to prepare the adjusting entries.

The concept of adjusting entries is that
we prepare adjusting entries

at the end of the accounting period,
ok?

That is the thing.
At the end of the accounting period.

If the accounting period is one month
we prepare adjusting entries

at the end of the month.

If the accounting period is the whole year
we prepare the accounting entries

at the end of the year, ok?

That is one concept that we need to
have in relation to adjusting entries.

The other thing is what we are adjusting
because the name is adjusting, ain't it?

What we are adjusting with these entries.

We adjust revenues or income
and expenses.

That is what we adjust to reflect
in the financial statements,

all the income or revenue
that has earned in the period,

and to reflect all the expenses
that have been incurred during the period.

That is what we show with
the adjustment entries.

That's why we cannot do adjustment entries
in the middle of the month

or at the beginning of the month,

it's always at the end of the period
because at the end of the period

we want to have in our financial statement
all the income earned in that period

and all the expenses incurred
in that period.

So this is the most important concept
to start with adjusting entries.

Then as I said some expenses
and revenue menu can be recorded exactly,

that's the things, others,
some expenses revenues cannot be recorded

we need to adjust to have
all the expenses incurred recorded

and the same for income or revenue.

To align with the business
activity statement,

the business activity statement
is the tax concept.

In many cases the tax period is the same
as the accounting period

in that case a year but we need
to be careful that we do not mix

with the tax concept when we
are talking with accounting

because there may be some differences.

Ok, so we will start as usual today
with the lecture in which I will pose

four multiple choice questions.

You will answer the questions,
and this will be a good feedback

for you and for me about
the understanding of some basic concepts

of this topic.

If I see that the distribution of
your answer is not very good

which is a very good feedback
in the sense that that lets me explain

why this answer is correct
or why it's not correct

for your own learning.

We will discuss that and I will use
these questions to explain

probably some of the concepts
if they are not clear.

So please feel free as usual to ask
any question during the lecture

and then during the workshop.

Last week we talked for more than
four and a half hours

in the whole thing because
of the number of questions

but probably today we will be less than
that because the topic is more specific

but I am happy to answer all the questions
to explain well,

the main purpose is for you
to understand these topics.

That is the main purpose of this topic
because then

you will be evaluated on this topic.

The second assessable homework
will be next week

after the topic four,
module four.

So that assessable homework two
includes this module,

module three,
adjusting and closing entries

and also the module four.

That's why it's very important,
if there is anything you do not understand

please ask, ok?

I hope no **

** I hope you will not be
four and a half hours.

Ok, for me it's ok.

I have enough energy to be
four and a half hours.

I feel sorry for you sometimes
after you're very tired after that time

but we will do the best we can.

Ok, so we will start with
the questions here.

Here we have the first question.

Have a look.

The question is when is the $1000
considered to be n?

So it's about the day when this
is considered to be n.

Look at all the dates that you have there
and you can vote for your answer.

When they are n.
Take your time.

Pima can't see properly, ok.

Pima, you can zoom,
I will put a bit bigger.

Maybe that can be...

Ok, good.

Ok. Uhm, ok.

What is the answer?

We have a distribution of answers
in the poll

so it's good to explain a bit.

That is the feedback I need,
so if that other whole distribution

of your answers means, yeah.

I need to explain how can we determined
when the $1000 are n.

Most of you actually answered correctly
but there are of course,

there are many different answers.

So this question is about when revenue
is n, ok?

That is the question,
we are using accrual accounting.

In accrual accounting revenue is recorded
when it is n,

not when cash is received,

and expenses when they are incurred
not when they are paid, ok?

So we need to identify from the dates
when these $1000 are n.

The day the manufacturer received a
purchase order for 10 dresses

for a total price of $1000,
15th November.

On 15th November the manufacturer
received the order, nothing happened,

so the revenue is not earned, ok?

The 10 dresses were delivered
on 30th November.

Delivered means that revenue is earned.

When is revenue earned?

When the products are delivered
to the customer.

They are passed from the company
to the customer.

At that point, revenue is earned.

In the case of services,
it's when services are provided.

When the service is provided,
service revenue is earned.

So that is the correct answer, ok?

There is some echo,
probably someone has the microphone on.

So this is the correct answer,
and the other dates,

the customer is sent an invoice
on 5th December.

No, the producer already delivered it,
doesn't matter that the invoice was sent

after the delivery of the produce.

The payment of the check is received
10th December.

Again, it's not related with when we
receive the payment

or when we bank the payment.

So, the correct answer is that.
any questions?

What is the answer?
I thought....

I put here, can you see the blue...

I wrote in the screen,
the blue circle.

It doesn't save.

30th November, that is the correct answer.

I'm not sure if...
Can you see because I drew a blue circle

Can you see them?

Ah, it's not a line.
Double is in the white space.

Ah, I didn't know that. Ok.
Ok, interesting.

In my screen it's exactly in see
but probably there are differences in this

Probably just zoom each,
probably.

I move my zoom in and out
and the circle is in see, that's the mode.

Ok, we go to the next one.

If a resource has been consumed
but an invoice has not been received

at the end of the accounting period,
which of this is correct?

I will update...
It doesn't move the page.

Ok, if you cannot follow this
I can change to...

Yes, I will reset the board.

Ok, so if a resource has been consumed
but an invoice has not been received

at the end of the accounting period,
what is the situation?

We have some different answers
but most of you are correct.

The correct answer is B.

Ok, B, an adjusting entry should be
recorded to recognize the expense.

Why is this?
Because the resource has been consumed.

When expenses are incurred is when
the resources are used or consumed.

That means that need to record
an expense, ok?

So in this case the only one,
and adjusting entry should be recorded

to recognize the expense.

Any question on this?

Is it clear?

Ok, we will go to the next one,
thank you Jay.

Number three, if an entity fails to adjust
the prepaid rent account

for rent that has expired,

what effect will this have on the
monthly financial statement?

Here you need to thing a bit more
because it's what's happening,

the adjusting entry was not recorded,
what would be the effect on that?

I will update the poll.

The previous answer was B.