Adjusting Entries

Solution of Adjusting Entries - Case 4.1 - Financial and Managerial Accounting

a) No adjusting entry is needed because the revenue has already been earned prior to dec 31st.

b) Adjusting Entry:
                              unearned revenue a/c.........Dr
                                             revenue  a/c    ............Cr    
Explanation:
                    3 months revenue was collected in advance on Dec 1 and was credited to unearned revenue a/c.At Dec 31st an adjusting entry is needed to recognized 1/3 of this amount is revenue.This entry effects is to reduce liability increase the revenue earned in this period and thus increase in owners equity.

c)Adjusting Entry:
                               A/R                          ...................Dr
                                     Revenue earned      ..........................Cr

Explanation:
                   It is necessary to record the revenue which is earned.

d) No adjusting Entry is needed because the affect of this will be start from next accounting period

e)Adjusting Entry:
                            deprecition exp...............Dr
                                        Accumulated deprection.........Cr

Explanation: Entry will be pass because the value of fixed asset is decreased with the passage of time.

f) Adjusting Entry:
                               
                                salary exp..............Dr
                                        salaries payable............Cr

Explanation: Entry will be passed because the expense of December is always recor in the same accounting period.