CHAPTER 3-THE ADJUSTING PROCESS

 

1.    Prepaid Expenses (also referred as deferred expense)

 

Expense paid in advance.  Adjusting JE example:

 


·         Rent Expense (Expense …)……….xxx

                                    Prepaid Rent (asset …)………….xxx

 

2.    Accrued Expenses

 

Expenses due but not yet paid. Adjusting JE example:

 


·         Salary Expense (Expense   )………….xxx

                                    Salary payable (liability   )………………xxx

 

3.    Depreciation

 

To record depreciation

 


·         Depreciation Expense (expense   )…….xxx

            Accumulated Depreciation (contra asset account *)……..xxx

  *all contra assets have normal credit balances

 

4.    Unearned Revenues (also referred to as deferred revenue)

 

Collecting cash in advance of doing service. Adjusting JE example:

 


·         Unearned Service Revenue (liability   )…….xxx

                                    Service Revenue (revenue …)…………………..xxx

 

5.    Accrued Revenues

 

Revenue earned but not yet collected in cash, that is, service has been performed but cash has not yet been collected. Adjusting JE example:

 


·         Accounts Receivable (asset   )….xxx

                                    Service Revenue (revenue …)…………………xxx