Saved. 4,000 : Interest on Capital. Which statement best describes the effect of this adjusting entry on the company’s accounting equation? Let’s say a company XYZ Ltd that has paid interest on the outstanding term loan of $1,000,000 for March 2018 on 5th April 2018. True False How much salary expense should be recorded two days later on January 2? The adjusting entry on December 31 is debit Accounts Receivable and credit Fees Earned. A brief description may be “purchased office supplies.” In the case of payroll accrual, the accounts affected may be Accrued Wages and Salaries (balance sheet) and Wage and Salary Expense (income statement). Treat adjusting entries just like you would treat normal entries. The bottom line: Before you use a prepaid expense item, it’s an asset. True False. en Change Language. 2,000 : Bad debt expense. A) Assets decrease, liabilities increase, and stockholder’s equity decreases B) Assets are not affected, liabilities increase, and stockholder’s equity decreases C) Assets decrease, liabilities … The expense matches the revenue with which it is associated. A) Salary Expense B) Withdrawals C) Depreciation Expense, Buildings D) Accumulated Depreciation, Buildings I feel like the answer is … Adjusting entries are journal entries recorded at the end of an accounting period to alter the ending balances in various general ledger accounts. Which statement best describes the effect of this adjusting entry on the companys accounting equation? Since the expense was incurred in December, it must be recorded in December regardless of whether it was paid or not. b. $5,000. Using the previous example, the transaction date is March 17, 2011. Prepaid Expenses: Prepaid expenses are assets that are paid for and then gradually used during the accounting period, such as office supplies.A company buys and pays for office supplies, and as they are depleted, they become an expense. And so what we're seeing here is that when the equipment was purchased, the cash affect the card. Which statement best describes the effect of this adjusting entry on the company’s accounting equation? If $2,500 is earned by December 31, the adjusting entry made at that time is debit Cash, $2,500 and credit Ticket Revenue, $2,500. With an adjusting entry, the amount of change occurring during the period is recorded. Learn more about Scribd Membership. For example, if the supplies account had a $300 balance at the beginning of the month and $100 is still available in the supplies account at the end of the month, the company would record an adjusting entry for the $200 used during the month (300 – 100). Accounts receivable – Alan (to record bad debts written off adjusting entry) 1,000 . However, the first journal entry of 20X4 simply reverses the adjusting entry. Is it a Revenue or Expense for September or not? In this example, a similar adjusting entry would be made for each subsequent month until the insurance policy expires 11 months later. ( A General Store) 1. An adjusting entry recorded June salary expense that will be paid in July. ADJUSTMENT – PREPAID EXPENSES• The two methods will have the same effect, as will be shown in the following analysis: 40. Adjusting Journal Entry - View presentation slides online. Allowance for doubtful debts (allowance for doubtful debt adjusted) 4,000 . Which of the following could appear in an adjusting entry, closing entry, and reversing entry? An adjusting journal entry impacts at least one balance sheet account and one income statement account. A. Close suggestions. 2. Assets are decreased, liabilities are increased, and stockholders equity is decreased. Because the payday for the week beginning Monday, December 31, 2017, is not paid until Friday, January 4, 2018, it is necessary to make an adjusting entry to accrue salaries through December 31, 2017. Things to Remember. Interest Expense will be closed automatically at the end of each accounting year and will start the next accounting year with a $0 balance. Note: Actually, if you combine the reversing entry and journal entry for collection.You'll come up with the journal entry above. Reversing Entry for Accrued Expense. $3,000. Adjusting Entries 1. If the bookkeeper doesn’t reverse this accrual enter, he must remember the amount of expense that was previously recorded in the prior year’s adjusting entry and only account for the new portion of the expenses incurred. None, matching requires the weekly salary to be accrued on December 31. An adjusting entry recorded April salary expense that will be paid in May. The value of the asset is then replaced with an actual expense recorded on the income statement. Step 4 ADJUSTMENTS 2. Let's try another one. Question 19 . This requires an entry to debit Salaries Expense and to credit Salaries Payable. Debit wages and salaries expense for the applicable amount. Which of the following entries would be prepared to record the next payment of salaries, on January, 2010 in the amount of $7,000? a. 3. This increases the company’s wages and salaries expense, which decreases total revenue. $7,000. Record accrual of Employer's contribution in EPS / EPF / ESIC: An adjusting entry recorded April salary expense that will be paid in May. The size of the entry equals the accrued interest from the date of … So on December 31, one month of protection had passed, and an adjusting entry transferred $ 200 of the $ 2,400 ( $ 2,400/12 = $ 200) to Insurance Expense. Write the journal entry using a pencil and paper. During the month when the office supplies are used, an adjusting entry is made to debit office supply expense and credit … Examples of Payroll Journal Entries For Wages. The accounts need to be closed on 30/6/2018. Example of Accrued Expense Journal Entry. ** Salary payavle a/c will record the net amount of salary whiich shall be paid to the employee(s). In this section of payroll accounting we will provide examples of the journal entries for recording the gross amount of wages, payroll withholdings, and employer costs related to payroll. This adjusting entry transfers $1000 from the Prepaid Expenses asset account to the Insurance Expense expense account to properly record the insurance expense for the month of September. Home. As you use the item, decrease the value of the asset. Any entry to record unrecognized income or expenses for the period is called an adjusting entry. 1,000 : Bad debt expense. Which statement best describes the effect of this adjusting entry on the company's accounting equation? 2. The wages and salaries expense account appears on a company’s income statement. And then the expense that's recorded at later dates is a result of a cruel accounting in a matching principle. The accounting for office or store supplies is similar to prepaid or unexpired expenses. Adjusting entry on January 31 to convert a portion of prepaid rent (an asset) to rent expense: * 9,000/3. Include the general ledger account number and title (specific to your company), debit office supplies expense for $100 and credit cash for $100. On the following payday, January 15, 20X5, the entire payment of $5,000 is recorded as expense. $2,000. Before this adjusting entry was made, the entire $ 2,400 insurance payment made on December 1, was a prepaid expense for 12 months of protection. Using the example from Step 1, a company will debit wages and salaries expense for $7,500. We need to account for 2 days, December 30 and 31. A) Assets decrease, liabilities increase, and stockholder’s equity decreases B) Assets are not affected, liabilities increase, and stockholder’s equity decreases C) Assets decrease, liabilities … The adjusting journal entry for Interest Payable is: It is unusual that the amount shown for each of these accounts is the same. Prepaid expenses journal entry 39. Sign In Join. December 28 and 29 are weekend days and employees do not work those days. 50, 000. Search Search. The income statement for the month of June, 2008 of Delgado Enterprises contains the following information: Revenues. As the $9,000 advance payment of rent is for a full quarter (i.e., three months), the adjusting entry made on January 31 will also be made at the end of the next two months (i.e., at the end of February and March). Financial Accounting Plus MyLab Accounting with Pearson eText -- Access Card Package (12th Edition) Edit edition. The accountant records the transaction of $3000 on 1/6/2018. We need to do an adjusting entry to record the salary earned by employees from December 28 – December 31 of this year. 2. Scribd is the world's largest social reading and publishing site. What is an Adjusting Entry? In this case, the company creates an adjusting entry by debiting interest expense and crediting interest payable. (commission received recorded as liability) 2,000 . The expense is related to the year that is completed and, therefore, must be recorded as an adjusting entry. In short, this journal entry recognized in the financial statements enhances the accuracy of the statements. The next example revisits the same facts using reversing entries. In this sense, the expense is accrued or shown as a liability in December until it is paid. To figure out how much to record for taxes, we need to calculate 35% of the profit, which would be $14,700 ($42,000 x 0.35). 1 Answer to An adjusting entry was made on December 31, 2009 to accrue salary expense of $2,800. Upload. Now we can record the entry. The adjusting entry in 20X3 to record $2,000 of accrued salaries is the same. $2,000. Expenses: Wages Expense. Example: Suppose that ABC Company and its lessor agrees that ABC will pay rent at the end of January 2020, covering a 3-month period starting November 1, 2019. NOTE: In the following examples we assume that the employee's tax rate for Social Security is 6.2% and that the employer's tax rate is 6.2%. The reversing entry erases the prior year’s accrual and the bookkeeper doesn’t have to worry about it. These adjustments are made to more closely align the reported results and financial position of a business with the requirements of an accounting framework , such as GAAP or IFRS . A company realizes that the last two day's revenue for the month was billed but not recorded. (2). Accounts Payable $2,500 An adjusting entry recorded April salary expense that will be paid in May. The Sales persons worked in August and received their salary in September, Rs. Once the item is used, it is an expense. 42. (Being Salary expenses recorded) * Salary expense a/c will be recording the Basic/Gross salary to be paid to employee exclusive/inclusive of all allowances given to him respectively. The adjusting entry necessary at the end of the fiscal period ending on Thursday is: a) Debit Salaries Payable, $36,000; credit Cash, $36,000 b) Debit Salary Expense, $36,000; credit Dividends, $36,000 c) Debit Salary Expense, $36,000; credit Salaries Payable, $36,000 d) Debit Dividends, $36,000; credit Cash, $36,000 10. Assets are not affected, liabilities are increased, and stockholders' equity is increased. They are initially recorded as asset by debiting office or store supplies account and crediting cash account.At the end of the accounting period, the total cost of supplies used during the period becomes an expense and an adjusting entry is made for it.If this adjusting entry … The cash effect happens first, and the adjusting entry is recorded later. Now the entry for insurance reflects six months’ expenses, which have been paid, but by June end, coverage of only one month could have been used. In the future months the amounts will be different. ADJUSTMENT – PREPAID EXPENSES• When an expense was recognized in the initial entry (expense method), the adjusting entry will involve an amount that is not yet expired (asset). Wages and salaries expense, which decreases total revenue short, this journal entry recognized in the future months amounts. Company realizes that the last two day 's revenue for the applicable amount adjusting entry made! 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