An accounting firm may be contracted to prepare or audit the annual financial statements. Services of lawyers and pension actuaries may also be needed. Precise fees for these services will be unknown until an invoice is rendered by the supplier. However, this usually occurs after the financial statements have been issued. To match the expense to the year in which the services apply, the fees are estimated and recorded as part of the Estimated Current Liabilities general ledger account at year-end.
Assume BDCC estimates that the audit fee for the 2015 financial statements will be $10,000. The following adjusting entry would be made (GST would not be recorded until the fees were actually invoiced by the supplier).
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