There are four main classifications of journal entries, and each serves its own purpose and has...
There are four main classifications of journal entries, and each serves its own purpose and has several examples. Identify one specific type of journal entry and answer the following questions about it.
Briefly provide answers to the following questions:
- What is the classification of the journal entry in question?
- What accounts get debited and credited to account for the transaction?
- How would the accounts be in error if the adjusting entry was not recorded at all?
- Most journal entries have a counterpart on the other side of the transaction. For example, if we are buying something from a supplier, it would be an expense to us, but revenue to the supplier. Considering this, what is the counterpart adjusting journal entry for the one that you have selected?
Homework Answers
The journal entry taken is unearned revenue recognised in the period. The sales revenue is recognised when the goods are delivered or service is performed.
i) Classification of journal entry is adjusting entry at the end of the period
ii) Unearned revenue gets debited and sales revenue gets credited
iii) The sales revenue would be understated and net income would be lower which will make Owner’s equity or Retained earnings being understated. Unearned revenue is current liability which will be overstated
iv) Counterpart adjusting entry would be expiry of prepayment done
Expense account would be debited and prepaid account would be credited. For example if it is advertisement related then Advertisement expense debit and Prepaid advertisement credit.
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