Chapter 3: Adjusting Entries
Adjusting entries are prepared at the end of the accounting year. They are made to adjust the account balances to the correct amount.
Adjusting entries follow a pattern that can be memorized.
There are six types of adjusting entries
1. Adjusting entry for supplies – to record that supplies have been used up.
|
Supplies Expense |
|
XXXXX |
|
|
|
Supplies |
|
XXXXX |
Debit Supplies expense, Credit supplies
The amount of the entry is the amount of supplies that have been used up. Sometimes you will have to use subtraction to find the amount of supplies used up.
2. Accrued Fees or Unbilled Fees – to record a bill that needs to be sent.
|
Accounts Receivable |
|
XXXXX |
|
|
|
Fees Earned |
|
XXXXX |
The amount will be given.
3. Prepaid Rent or Insurance – to record a prepaid asset that has lost value
|
Rent (Ins.) Expense |
|
XXXXX |
|
|
|
Prepaid Rent (Ins.) |
|
XXXXX |
The amount of the entry is amount of insurance or rent that has expired. Sometimes you will need to use subtraction to find the amount expired.
4. Depreciation – to record an asset losing value
|
Depreciation Expense |
|
XXXXX |
|
|
|
Accumulated Depreciation |
|
XXXXX |
The amount will be given.
5. Accrued Wages – to record wages owed to employees
|
Wages Expense |
|
XXXXX |
|
|
|
Wages Payable |
|
XXXXX |
The amount will be given.
6. Unearned Fees/Rent/Revenue (a liability is becoming revenue)
|
Unearned Fees/rent/Revenue |
|
XXXXX |
|
|
|
Fees Earned |
|
XXXXX |
This entry is made for the amount of the liability that has become revenue. You may need to use subtraction to find the answer.
All that you can do to learn this material is to memorize or understand what is above and then practice lots of problems!!!