3. Basic Equation
Asset
= Liabilities +
Expanded
Equation
Asset
= Liabilities +
Debit/ Credit
Effect
Equity
Share
Capital
+ Retained - Devidend + Revenues - Expenses
Earning
Dr
Cr
Dr
Cr
Dr
Cr
Dr
Cr
Dr
Cr
Dr
Cr
Dr
Cr
+
-
-
+
-
+
-
+
+
-
-
+
+
-

4. Types
Deferals
Adjusting Entries
Prepaid Expenses
Dr
Expenses
Cr
Assets
Cr
Unearned Revenues
Dr
Liabilities
Cr
Revenues
Dr
Accrued Revenues
Dr
Assets
Cr
Revenues
Cr
Accruals
Dr
Accrued Expenses
Dr
Expenses
Cr
Liabilities
Notes: Each adjusting entry will affect one or more income statement accounts
and one or more statement of financial position accounts.
Interest Computation
Interest = Face Value of Note X Annual Interest Rate X Time in Terms of One Year

5. Purpose
1. Update Retained Earning account in the ledger by transferring net income
(loss) and devidends to RE.
2. Prepare the temporary accounts (revenues, expenses, and dividends) for
the next period’s postings by reducing their balances to zero.
Process
1. Debit each revenue account and Credit Income Summary.
2. Credit each expenses account and Debit Income Summary.
3. Debit (Credit) Income Summary and Credit (Debit) Retained Earning for the
amount of net income (loss).
4. Credit RE for the balance of Dividend account and Debit Dividend for the
same amount.
Stop and Check: use worksheet of trial balance.

6. Ownership and Point of Sale
Freight Terms
Point of Sales
Ownership of Goods
Who Pay
Freight Expense
(i.e. when the risk
on Public Carrier Freight Costs
Treated as
is transferred)
Resides with:
b/w Point
FOB Shipping Depart from Seller
Point
Warehouse
Buyer
Buyer
Inventory cost
for Buyer
FOB
Destinantion
Seller
Seller
Delivery expense
for seller
Arrive to Buyer
Warehouse

7. Perpetual vs Periodic Journal Entries
Event
Purchase of goods
Perpetual
(Dr) Inventory,
(Cr) Cash/ AP
Periodic (*)
(Dr) Purchases
(Cr) Cash / AP
Freight (shipping
point)
(Dr) Inventory,
(Dr) Freight in
(Cr) Cash
(Cr) Cash
Retuns of goods
(Dr) Cash/ AP,
(Cr) Inventory
Sales of goods
(Dr) Purchases
(Cr) Purchase Returns and Allowances
(Dr) Cash/ AR,
(Dr) Cash / AR
(Cr) Sales
(Cr) Sales
(Dr) COGS,
No Entry
(Cr) Inventory
End of period
No Entry (if no absolence or
loss)
Closing or Adjusting entries required, to record
the ending inventory balance .
(*) Costing Method
(1) Specific identification, (2) FIFO, and (3) Weighter average

8. The Fraud Triagle
Principles of Internal Control Activities
1. Establishment of responsibility.
2. Segregation of duties/ functions.
3. Documentation procedures.
4. Physical controls.
5. Independent internal verification.
6. Human resouce controls.

9. Bank Reconciliation
Bank
Books
Balance per Bank Statement
Balance per Books
Add: deposit in transit
Add: unrecorded credit memo from
bank statement
Deduct: outstanding checks
Deduct: unrecorded debit memo from
bank statement
Adjusted cash balance
Adjusted cash balance
Notes:
1. Errors should be offset (added or deducted) on the side that made the error.
2. Adjusting journal entries should only be made on the Books.

10. Method to Account for Uncollectible Accounts
Direct write off method
 No adjustment entry
 Record bad debt expense when the company
determines a particular account to be uncollectible
Allowance method:
% of sales
 Make adjustment entry
 At the end of each period, estimate the amount of
credit sales uncollectible (e.g.: xxx).
Dr: Bad Debt Expense
xxx
Cr: Allowance for Doubtful Account
xxx
 As spesific account become uncollectible
Dr: Allowance for Doubtful Account
Cr: Account Receivables
Allowance method:
% of receivables
 Make adjustment entry
 At the end of each period, estimate the amount of
uncollectible receivables (e.g.: xxx) :
Dr: Bad Debt Expense
(xxx- beginning balance)
Cr: Allowance for Doubtful Account
(xxx- BB)
 As spesific account become uncollectible
Dr: Allowance for Doubtful Account
Cr: Account Receivables

11. Aset Tetap Berwujud
PPE (IAS 16)
Tanah/Bangunan/
Mesin
Digunakan dalam
operasional.
Disewakan dalam
bentuk sewa
pembiayaan.
Digunakan untuk
administrasi.
Properti Investasi
(IAS 40)
Tanah / Bangunan
Untuk peroleh
pendapatan sewa
Untuk dapat capital
gain
Aset Tidak Lancar Held for Sale
(IFRS 5)
Aktiva Tetap
Dijual dalam
waktu dekat.

12. Presentation
Tangible Assets
Intangible Assets
Property, Plant, and Equipment (IAS 16)
Intangible Assests (patents, copyrights,
trademarks, franchises, goodwill) (IAS 38)
Natural Resources
Computation of Annual Depreciation Expense
Straight-line method
Units-of-activity
Declining balance
Cost – Residual Value
Useful Life (in years)
Depreciable Cost X units of activity during year
Useful Life (in units)
Book value at beginning X Declining balance rate
* Declining balance rate = 1 : useful life in years

13. Aset tetap berupa tanah, bangunan atau tanah dan bangunan yang dimiliki
entitas, dengan tujuan untuk mendapatkan pendapatan sewa atau untuk
mengapresiasi kenaikan nilai atau keduanya, dan tidak untuk:
1.
digunakan dalam produksi atau penyediaan barang atau jasa atau
untuk tujuan administratif; atau
2.
dijual dalam kegiatan sehari-hari.
Tidak termasuk Properti Investasi:
1.
Dimaksudkan untuk dijual dalam operasi normal entitas
2.
Dibangun atau dikembangkan sebagian oleh pihak ketiga, bukan untuk
tujuan property investasi.
3.
Digunakan dalam operasi normal entitas
4.
Disewakan ke pihak lain dengan sewa pembiayaan.

14. Comparison of Long-term Bond Investment and Liability Journal Entries
Event
Investor
Investee
Purchase / Issue of Bonds Dr: Debt Investment
Cr: Cash
Dr: Cash
Cr: Bond Payable
Interest receipt/ payment
Dr: Interest Expense
Cr: Cash
Dr: Cash
Cr: Interest Revenue
Comparison of Cost and Equity Methods of Accounting LT Share Investment
Event
Acquisition
Cost
Dr: Share Investment
Cr: Cash
Equity
Dr: Share Investment
Cr: Cash
Investee Reports Earnings No Entry
Dr: Share Investment
Cr: Investment Revenue
Investee Pays Devidends
Dr: Cash
Cr: Share Investment
Dr: Cash
Cr: Dividend Revenue

15. Trading (Share) and Available for Sale / Hold for Collection (Bond) Securities
Classification
Valuation Approach and Reporting
Income Effects
Amortized cost / Current or Non
current asset
Interest is recognized as revenue. No holding
gain / loss recognized.
Fair value / Current asset
Interest is recognized as revenue. Unrealized
holding gain /loss is included in income
Fair value / Current asset or Non
current asset
Interest is recognized as revenue. Unrealized
holding gain /loss is included in income
1. Not meet contractual
cash flow test; holding <
20% (trading).
Fair value / Current asset
Dividend is recognized as revenue.
Unrealized holding gain /loss is included in
income
2. Not meet contractual
cash flow test; holding <
20% (non trading)
Fair value / Non current asset
Dividend is recognized as revenue.
Unrealized holding gain /loss is included in
other comprehensive income.
3. Holding > 20%
(significant influence or
control)
Originally recorded at cost with
periodic adjust for the share of the
investee’s income /loss, and
decreased by dividends received /
Non current asset
Revenue is recognized to the extent of the
investee’s income /loss reported subsequent
to the date of the investment.
Debt Investment
1. Meets business model
(HFC) n contractual CFM
2. Not meet the business
model test (not HFC).
3. Fair value option.
Equity Investment

16. Sumber: KPMG, 2008

17. Premiun
Market interest rate < Contractual interest rate
Face Value
Market interest rate = Contractual interest rate
Discount
Market interest rate > Contractual interest rate
Computation of annual bond interest expenses
Interest expense = interest paid (payable) + amortization of discount
(or) – amortization of premium
Effective interest
amortization
(preferred method)
Bond interest expense
Bond interest expense
Carrying value of bonds at
beginning of period x
effective interest rate
Face value of bonds x
contractual interest rate

18. No Par Value vs Par Value Share Journal Entries
No Par Value
Par Value
Cash
Cash
Share capital - ordinary
Share capital – ordinary
Share premium – ordinary
Comparison of Dividends Effects
Cash
Share capital - ordinary
Cash dividend
Retained earning
No effect
Share dividend
No effect
Share split
No effect
No effect
No effect
No effect
Debits and Credits to Retained Earnings
Debits (Decreases)
1. Net losses.
2. Prior period adjust for overstate of income
3. Cash dividends and share dividends
4. Some disposal of treasury shares
Credits (Increases)
1. Net income
2. Prior period adjustment for
understatement of income

19. Cashflow from Operating Activities (Indirect Method)
Net Income
Add:
Loss on disposal of assets
$ xxx
Amortization and depreciation
Decrease in non-cash current assets
xxx
Increase in current liabilities
Deduct:
xxx
xxx
Gains on disposal of assets
$ (xxx)
Increase in non-cash current assets
(xxx)
Decrease in current liabilites
(xxx)
Net cash provided (used) by Operating Activities
$
xxx
$
xxx
$
xxx
Cashflow from Investing Activites (only use Gross Method)
Add:
Sale of Fixed / Noncurrent Assets
Deduct:
Purchase of Fixed / Noncurrent Assets
$ xxx
(xxx)
Net cash provided (used) by Investing Activities
Cashflow from Financing Activites (only use Gross Method)
Add:
Proceed from Long-term Financing
Deduct:
Payment / Settlement for Long-term Financing
Net cash provided (used) by Financing Activities
$ xxx
(xxx)

20. Cashflow from Operating Activities (Direct Method)
Cash Receipts
From:
Sales of goods and services to customer
$ xxx
Interest and dividend receipt
xxx
Others operating receipts
xxx
Cash Payments
For:
Purchase of goods and service from supplier
$ (xxx)
Interest payment
(xxx)
Tax payment
(xxx)
Net cash provided (used) by Operating Activities
$
xxx
$
xxx
$
xxx
Cashflow from Investing Activites (only use Gross Method, can not be offset)
Add:
Sale of Fixed / Noncurrent Assets
Deduct:
Purchase of Fixed / Noncurrent Assets
$ xxx
(xxx)
Net cash provided (used) by Investing Activities
Cashflow from Financing Activites (only use Gross Method, can not be offset)
Add:
Proceed from Long-term Financing
Deduct:
Payment / Settlement for Long-term Financing
Net cash provided (used) by Financing Activities
$ xxx
(xxx)

21. Period Prior Adjustments
 Books still open:
Directly reverse the related accounts.
 Books closed:
Statement of Retained Earnings (adjustment of
beginning RE )
Discontinued Operations
Income Statement (presented separately after “Income
from Continuing Operations”)
Change in Accounting
Principle
 In most intances, use the new method in current
period and restate previous years result using new
method.
 For changes in depreciation and amortization
methods, use the new method in the current period,
but do not restate previous periods.