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Concept explainers
Adjusting entries refers to the entries that are made at the end of an accounting period in accordance with revenue recognition principle, and expenses recognition principle. All adjusting entries affect at least one income statement account (revenue or expense), and one balance sheet account (asset or liability).
Types of adjusting entries:
There are two types of adjusting entries, they are:
- Accruals and,
- Deferrals.
Deferrals:
Deferrals refer to the revenues that are collected in advance before the services are provided or sales are made to the customer, and the expenses are paid in advance before the expenses are incurred.
Deferrals are classified into two types. They are prepaid expenses, and unearned revenues.
Prepaid expenses: The expenses are paid in cash, before they are incurred.
Unearned revenue: The cash is received, before the services are performed.
Accruals:
Accruals refer to the revenues that are generated from goods delivered or, service performed to the customer, but cash is not yet received from the customer, and the expenses are incurred, but cash is not yet paid.
Accruals are classified into two types. They are accrued revenues, and accrued expenses.
Accrued revenues: Revenues are generated but not yet received in cash.
Accrued expenses: Expenses are incurred but not yet paid in cash.
To indicate: The types of adjustment and requirement of adjusting entry for the given accounts.
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Chapter 3 Solutions
ACCOUNTING,CHAP.1-13
- Identify which type of adjustment is associated with this account, and what is the other account in the adjustment? Choose accrued revenue, accrued expense, deferred revenue, or deferred expense. A. accounts receivable B. interest payable C. prepaid insurance D. unearned rentarrow_forwardPrepare adjusting journal entries, as needed, considering the account balances excerpted from the unadjusted trial balance and the adjustment data. A. depreciation on fixed assets, $ 8,500 B. unexpired prepaid rent, $12,500 C. remaining balance of unearned revenue, $555arrow_forwardIdentify which type of adjustment is associated with this account, and what the other account is in the adjustment. Choose accrued revenue, accrued expense, deferred revenue, or deferred expense. A. Salaries Payable B. Interest Receivable C. Unearned Fee Revenue D. Prepaid Rentarrow_forward
- Allowance for Uncollectible Accounts is a contra asset account, which means that its normal balance is a credit. However, it is possible for the account to have a debit balance before year-end adjustments are recorded. Explain how this could happen. How does an accountant calculate the year-end adjustment for Allowance for Uncollectible Accounts with a debit balance before year-end adjustments recorded? Please explain both answers in good detail answerarrow_forwardPlease explain what an Unearned Revenue account is and why an adjustment may be necessary for Unearned Revenue. Please provide an example of an adjusting entry for Unearned Revenue.arrow_forwardPlease check my work For journal entries 1 through 12, indicate the explanation that most closely describes it. You can use explanations more than once. To record receipt of unearned revenue. To record this period's earning of prior unearned revenue. To record payment of an accrued expense. To record receipt of an accrued revenue. To record an accrued expense. To record an accrued revenue. To record this period's use of a prepaid expense. To record payment of a prepaid expense. To record this period's depreciation expense.arrow_forward
- Which account is least likely to appear in an adjustingjournal entry?a. Cashb. Interest Receivablec. Income Tax Expensed. Salaries and Wages Expensearrow_forwardThe Journal entry to update the accounts for customer subscriptions that are prepaid but not yet earned is which of the following types of adjusting entries? Multiple Choice O Prepaid item Unearned Revenue Accrued Expense Accrued Revenue Not an adjusting entryarrow_forwardTo record estimated uncollectible accounts using the allowance method, the adjusting entry would be a ?arrow_forward
- Answer the following questions that are related to the following Interest Payable T-account: February transactions Debit Req A Required: a. What is the amount of the February 28 adjustment? b. What account would most likely have been credited for the amount of the February transactions? c. What account would most likely have been debited for the amount of the February 28 adjustment? d. Why would this adjusting entry have been made? Complete this question by entering your answers in the tabs below. Req B to D Interest Payable Debit February transactions What is the amount of the February 28 adjustment? February 28 adjustment Req A February 1 balance 1,500 February 28 adjustment February 28 balance 4 Req B to D www February 1 balance 1,500 February 28 adjustment February 28 balance. Credit Complete this question by entering your answers in the tabs below. Navt b. What account would most likely have been credited for the amount of the February transactions? c. What account would most…arrow_forwardEntry 4 5 6 7 8 CO 3 2 9 1 10 Explanation Interest Expense Interest Payable Depreciation Expense Accumulated Depreciation Unearned Revenue Services Revenue Insurance Expense Prepaid Insurance Salaries Payable Cash Prepaid Rent Cash Salaries Expense Salaries Payable Interest Receivable Interest Revenue Cash Journal Entries Cash expense. Accounts Receivable (from consulting) Unearned Revenue Cash Debit 1,300 4,400 3,600 3,700 2,000 4,500 5,600 5,400 8,200 7,100 2,200 Credit 1,300 4,400 3,600 3,700 2,000 4,500 5,600 5,400 8,200 7,100arrow_forwardThe Journal entry to update the accounts for rent expense recorded that has not expired is which of the following types of adjusting entries? Multiple Choice Prepaid item Unearned Revenue Accrued Expense Accrued Revenuearrow_forward
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