Expense discovered after month-end close
Please help with the following problem!
"You are in the process of doing month-end close, and you just received a phone bill (which arrived late) which refers to the accounting period that is being closed. Is any adjusting entry needed?"
Thank you for any help.
The questionis, did you already accrue the expense in the first place?
For accruing an expense like a phone bill... the following should be done...
Before receiving the phone bill:
Dr. Phone Expense
Cr. Accounts payable
After the bill arrives:
Dr. Accounts payable
Cr. Cash
zahid
Google Plus: +Zahid Lilani | Twitter: @ZahidLilani
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Why do i need to credit cash, if i haven't actually paid the bill yet?
I mention above that After the bill arrives you
Dr. Accounts payable
Cr. Cash
I assumed that once you get the bill you will pay it... was I wrong?
zahid
Google Plus: +Zahid Lilani | Twitter: @ZahidLilani
“Your time is limited, so don't waste it living someone else's life."
- Steve Jobs
IRS Circular 230 notice: In order to comply with requirements imposed by the IRS, I must inform you that any tax advice contained on this forum is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code.
What if you don't know the exact amount of the bill? If you enter phone expense at$100.00, but when the bill arrives, it is only $80.00. How do you account for the difference?Originally Posted by ZahiD
If you can,make an adjustment to avoid any problem.I mean much better to file everything.As they say,better late than never.It can be adjusted but absolutely there's should be a range filed like from a phone bill.
'
Just stick it next month, havent you heard of materiality.
If the period is closed you havent accrued it , and you cant adjust backwards then fix it in the next period.
Stick Pigeons
Finally, words of sense from rambler. Practice and academia seldom eat lunch together,
unless to BOX THE IDIOT PROFESSORS EARS I LISTENED TO FOR 6 FRICKEN YEARS.
My professors turned to me to ask if an IRS rule limits membership for an LLC
similar to an S-Corporation. Pathetic, LLCs are created via state law, LLCs, LPs, LLPs and LLLPs
lack any restrictions for maximum number of members (I think I gave my age in the previous rant).
Revisions to entry without "adjustment" are not Verboten. Hence the discovery of
the melodious footnote (fn) and erasure (replaced by liquid paper).
Give rambler a rep power for his reasoning. Ahh, how do I... Hmm, I'm a Moderator, I should know
how to grant "rep power".
Hello, all take note lovely is another UKer, hurrah, three Brits at AB.
Last edited by Helse; 12-25-2009 at 01:30 AM.
Of course there are different levels of materiality to consider. It might be immaterial for the financial statements but may be material as to the monthly bonus computation for a unit manager. It also depends on how many units your company has and how it handles exceptions. Sometimes you have to discuss with operations and incorporate their preferences into your procedures.
Each organization should include in the accounting policy and procedures manual.
Since utility bills are accrued monthly - someone should have entered an "payment" estimate and paid it accordingly. If the invoice was more/less than your estimate - the next months accrual could have been adjusted.
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