Chapter 3&4 (A) Journal Entries

Question 1

5-step process to measure & report REVENUE under IFRS

Answer 1

1. Identify the Contract
   with the client or customer
2. Identify Performance Obligations
   in the contract
3. Determine Transaction Price
4. Allocate Transaction Price
   to the Performance Obligations in the contract
5. Recognize Revenue
   when Performance Obligation Satisfied

Question 2

3 conditions met for REVENUE recognized under ASPE

Answer 2

1. Services/Goods Given to Buyer
   (1a.The services provided to the buyer or
   1b. the risks & rewards of ownership of the goods transferred to buyer)
2. Revenue is reliably Measured
3. Collection is reasonably Assured

Question 3

Performed service, billed client
not yet paid

Debit / Credit?
(J.E. & A.J.E.)

Answer 3

Account Receivable / Service Revenue

Question 4

Received sponsorship to be distributed in each of future months

Debit / Credit? (J.E.)

Answer 4

Cash / Deferred Revenue

Question 5

Received payment in advance from client for service or goods

Debit / Credit?
(J.E.)

Answer 5

Cash / Deferred Revenue

Question 6

When actual liabilities incurred (e.g. being billed) and not yet paid

Debit / Credit?
(J.E. & A.J.E.)

Answer 6

Expense / Account Payable

Question 7

Issuing shares

Debit/Credit?
(J.E.)

Answer 7

Cash / Common Share

Question 8

Recognition of
Expense

Answer 8

Equity Decreased because
assets consumed
or liabilities incurred

Matching means the
efforts of expenses match the results of revenues

Question 9

Depreciation of PPE

Debit / Credit?
(A.J.E.)

Answer 9

Depreciation Expense /
Accumulated Depreciation - PPE

Question 10

Temporary Accounts
(Nominal)

Answer 10

Components of Retained Earnings:
E.g. Revenues, Expenses and Dividends Declared accounts

Question 11

Permanent Accounts
(Real)

Answer 11

Assets, Liabilities & Shareholders’ Equity accounts
carried forward to the next accounting period.

Question 12

Process of Closing Entries

Answer 12

1. Dr all Revenues /
   Cr Income Summary
2. Dr Income Summary /
   Cr all Expenses
   (Assume Rev. > Exp.)
3. Dr Income Summary (sum) /
   Cr Retained Earnings
   (transfer I/S to R/E)
4. Dr Retained Earnings /
   Cr Dividends Declared

REID

Question 13

Accrued Expenses

Debit / Credit?
(A.J.E.)

Answer 13

___ Expense /
___ Payable

Question 14

Accrued Revenues

Debit / Credit?
(A.J.E.)

Answer 14

___ Receivable / ___ Revenue (or Income)

Question 15

Each transaction must be recorded in at least TWO accounts

Answer 15

Double-Entry System