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College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

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BuyFindarrow_forward

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756
Textbook Problem

The Venice Theatre sold and collected cash of $45,000 for season tickets. Upon collection of cash, Unearned Ticket Revenue was credited. At the end of the accounting period, $15,000 had been earned. Make the appropriate adjusting entry.

To determine

Record the appropriate adjusting entry.

Explanation

Unearned revenue:

Unearned revenue is recorded as current liability on the balance sheet. In this case the cash is received in advance and the company is obliged to make payment to the customers for the product purchased or service received, or must refund the money if not satisfied by the customers.

Adjustment entries:

Adjusting entries are those entries which are made at the end of the year to update all the balances in the financial statements to show the true financial information and to maintain the records according to accrual basis principle.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

  • Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.
  • Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses...

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