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College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570

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BuyFindarrow_forward

College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570
Textbook Problem

Journalize the following adjusting entries that were included on the work sheet for the month ended December 31.

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To determine

Prepare adjusting journal entries.

Explanation

Adjusting entries: Adjusting entries are those entries which are recorded at the end of the year, to update the income statement accounts (revenue and expenses) and balance sheet accounts (assets, liabilities, and owners’ or stockholders’ equity) to maintain the records according to accrual basis principle and matching concept.

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Debit and credit rules:

  • ■ Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.
  • ■ Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

Prepare adjusting journal entries.

Adjusting entry for the salaries expense:

DateAccount Titles and ExplanationPost Ref.Debit ($)Credit ($)
December31Salaries Expense 2,700 
   Salaries Payable  2,700
  (Record accrued salaries expenses)   

Table (1)

Description:

  • ■ Salaries Expense is an expense account. Since expenses decrease equity, equity value is decreased, and a decrease in equity is debited.
  • ■ Salaries Payable is a liability account. Since amount of payables has increased, liability decreased, and an increase in liability is credited.

Adjusting entry for the prepaid insurance:

DateAccount Titles and ExplanationPost Ref.Debit ($)Credit ($)
December31Insurance Expense 1,200 
   Prepaid Insurance  1,200
  (Record part of prepaid insurance expired)   

Table (2)

Description:

  • ■ Insurance Expense is an expense account. Since expenses decrease equity, equity value is decreased, and a decrease in equity is debited.
  • ■ Prepaid Insurance is an asset account. Since amount of insurance is expired, asset account decreased, and a decrease in asset is credited...

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