Question

DB 1- What four different types of adjustments are frequently necessary before financial statements are prepared at the end of an accounting period? Give at least one example of each type.

Answer 1

1.) Expiration of any prepaid Expense Prepaid Insurance was $ 10,000 out of which $5,000 expired on Year end. General Journal Insurance Expense Prepaid Insurance Debit $ Credit $ 5,000 5,000 2.) Recording of Supplies Expense Supplies in the books is $ 8,000, Actual supplies on hand is $ 2,500 on year end. General Journal Supplies Expense Supplies ( 8,000 - 2,500) Debit $ Credit $ 5,500 5,500 3.) Recording of annual depreciation Equipment cost $ 10,000, life - 5 Year, Straight line depreciation General Journal Depreciation Expense Accumulated Depreciation-Equipment (10,000/5) Debit $ Credit $ 2,000 2,000 4.) Recognition of unearned revenue to Revenue Unearned service revenue is $5,000 out of $ 3,000 has been earned on year end. General Journal Unearned Service Revenue Service Revenue Debit $ Credit $ 3,000 3,000