Adjusting entries for unearned fees The balance in the unearned fees account, before adjustment at the end of the year, is $18,000. Journalize the adjusting entry required if the amount of unearned fees at the end of the year is $3,600.

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Financial And Managerial Accounting

15th Edition

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Publisher: Cengage Learning,

ISBN: 9781337902663

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Financial And Managerial Accounting

15th Edition

WARREN + 1 other

Publisher: Cengage Learning,

ISBN: 9781337902663

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To determine

Record the adjusting entry for the unearned fees.

Explanation of Solution

Unearned Revenue

Unearned revenue is the revenue which is earned in advance, ahead of providing goods and services. As per the revenue recognition principle it is not recorded in the books of accounts. This is a liability for the business.

Adjusting Entries

Adjusting entries indicates those entries, which are passed in the books of accounts at the end of one accounting period. These entries are passed in the books of accounts as per the revenue recognition principle and the expenses recognition principle to adjust the revenue, and the expenses of a business in the period of their occurrence.

Rule of Debit and Credit:

Debit - Increase in all assets, expenses & dividends, and decrease in all liabilities and stockholders’ equity.

Credit - Increase in all liabilities and stockholders’ equity, and decrease in all assets & expenses.

Date	Account Titles and Explanation	Debit ($)	Credit ($)
December 31	Unearned Revenue (1)	14,400
	Service Revenue		14,400
	(To record the fees earned at the end of the accounting period)

Table (1)

The impact on the accounting equation for the above referred adjusting entry is as follows:

Assets = {Liabilities-$14,400} + {Stockholders'Equity+$ 14,400}

• Unearned revenue is a liability, and it is decreased by $14,400

Adjusting entries for unearned fees The balance in the unearned fees account, before adjustment at the end of the year, is $18,000. Journalize the adjusting entry required if the amount of unearned fees at the end of the year is $3,600.

Financial And Managerial Accounting

Solutions

Financial And Managerial Accounting

Adjusting entries for unearned fees

The balance in the unearned fees account, before adjustment at the end of the year, is $18,000. Journalize the adjusting entry required if the amount of unearned fees at the end of the year is $3,600.

Explanation of Solution

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