1. 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.

2. 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
Cash
Adjusting Entry:
Dec 31 Rent Expense
Prepaid Rent

3. 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

4. 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
Unearned Rent Revenue
Adjusting Entry:
Dec 31 Unearned Revenue
Rent Revenue

5. 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 ,000
Cash ,000
Adjusting Entry:
Dec 31 Interest Receivable
Interest Revenue
(Accrue one month’s interest)
* 8,000 * 12% * 1/12 = 80

6. 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 ,000
Note Payable ,000
Adjusting Entry:
Dec 31 Interest Expense
Interest Payable
(Accrue one month’s interest)
*8,000 * 12% * 1/12 = 80

7. 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

8. 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

9. 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.

10. 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, Cash $3,400