Types of Adjusting Entries Deferrals Accruals 1. Prepaid Expenses. Expenses paid in cash and recorded as assets before they are used or consumed. 3. Accrued Revenues. Revenues earned but not yet received in cash or recorded. 2. Unearned Revenues. Revenues received in cash and recorded as liabilities before they are earned. 4. Accrued Expenses. Expenses incurred but not yet paid in cash or recorded.

Adjusting Prepayments On Dec 1, Mr. Tenant pays $800 as advance payment toward rent. The rental term begins on December 1, with monthly rental of $400. Date Account Dr Cr Dec 01 Prepaid Rent 800 Cash 800 Adjusting Entry: Dec 31 Rent Expense 400 Prepaid Rent 400

Adjusting Entry: Depreciation Expense Hardy Company purchased a computer for $2,400 on December 1. It is estimated that annual depreciation on the computer will be $480. If financial statements are to be prepared on December 31, the company should make the following adjusting entry: Adjusting Entry** Depreciation Expense $40 Accumulated Depreciation $40 **$480/12 = $40 per month

Adjusting Unearned Revenue On Dec 1, Mr. Landlord receives $800 as advance payment toward rent. The rental term begins on December 1, with monthly rental of $400. Date Account Dr Cr Dec 01 Cash 800 Unearned Rent Revenue 800 Adjusting Entry: Dec 31 Unearned Revenue 400 Rent Revenue 400

Adjusting Accrued Revenue On Dec 1, Mr. Lender makes a loan of $8,000 to Mr. Borrower. The loan term is 3 months. The interest rate is 12% per year. Lender receives a note. Date Account Dr Cr Dec 01 Note Receivable 8,000 Cash 8,000 Adjusting Entry: Dec 31 Interest Receivable 80 Interest Revenue 80 (Accrue one month’s interest) * 8,000 * 12% * 1/12 = 80

Adjusting Accrued Expenses On Dec 1, Mr. Borrower takes a loan of $8,000 from Mr. Lender. The loan term is 3 months. The interest rate is 12% per year. Lender receives a note for the amount. Date Account Dr Cr Dec 01 Cash 8,000 Note Payable 8,000 Adjusting Entry: Dec 31 Interest Expense 80 Interest Payable 80 (Accrue one month’s interest) *8,000 * 12% * 1/12 = 80

Adjusting Entries: Supplies (1of 2) Amber Company bought supplies costing $5,600 on January 1. On January 31, supplies on hand were $4,200. Record supplies purchase for January. Amber debits all purchases of supplies to the appropriate asset account. Original entry: Supplies 5,600 Cash 5,600

Adjusting Entries Supplies (2 of 2) Adjusting Entry Dr Cr Supplies Expense $1,400 Supplies $1,400 Pur: $5,600 End: ($4,200) Expense: $1,400 Supplies Supplies Expense $5,600 $1,400 $4,200

Adjusting Salary Entries Thornton Company pays its employees on a weekly basis, the week after the work week. It owed $3,400 in salaries for the last work week in December. The payment was made on January 3 of the following year.

Adjusting Salary Entries Dec 31 (adjusting entry): Dr Cr Salaries Expense $3,400 Salaries Payable $3,400 January 03 (PAYMENT in the following year): Salaries Payable $3,400 Cash $3,400