Two questions here, please answer clearly and thoroughly your help is very appreciated!First QuestionAre there 3 adjusting entries a) Accrual Adjustments b) Prepayments/Deferrals c) Special AdjustmentsSecond questionI am confused about the accounts used in adjusting entries. The accounts seem to be contradictory.1. Accrual Adjustment-accounts receivable is debited and Service Revenue is credited. Why is Service Revenue credited? I understand it is a credit account. Why isn't it considered an asset? Revenue is money that is coming into the company correct?2) Prepayments and Deferralsaccounts used in this entry are Cash/Unearned Revenue and Unearned Revenue/Service Revenue.Again the confusion here is that Cash is an asset. Revenue should also be an asset because it is money coming into the company. Please explain how I am wrong .Unearned Revenue/Service RevenueThese are both Revunue accounts. How can they be adjusted at the same time? Why is one a debit account why is one a credit account?Special AdjustmentsThe accounts for these type of entries are Income Tax Expense/Income Tax Payable.Why is Tax used twice? I see how it can be an expense, but I don't see how it would be a payable.
Two questions here, please answer clearly and thoroughly your help is very appreciated!
First Question
Are there 3 adjusting entries a) Accrual Adjustments b) Prepayments/Deferrals c) Special Adjustments
Second question
I am confused about the accounts used in adjusting entries. The accounts seem to be contradictory.
1. Accrual Adjustment-accounts receivable is debited and Service Revenue is credited. Why is Service Revenue credited? I understand it is a credit account. Why isn't it considered an asset? Revenue is money that is coming into the company correct?
2) Prepayments and Deferrals
accounts used in this entry are Cash/Unearned Revenue and Unearned Revenue/Service Revenue.
Again the confusion here is that Cash is an asset. Revenue should also be an asset because it is money coming into the company. Please explain how I am wrong .
Unearned Revenue/Service Revenue
These are both Revunue accounts. How can they be adjusted at the same time? Why is one a debit account why is one a credit account?
Special Adjustments
The accounts for these type of entries are Income Tax Expense/Income Tax Payable.
Why is Tax used twice? I see how it can be an expense, but I don't see how it would be a payable.
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