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