CHAPTER 3 REVIEW OF THE ACCOUNTING PROCESS **ILLUSTRATION 3-3 SUMMARY OF ADJUSTMENT RELATIONSHIPS AND EXPLANATIONS Type of Account Reason for Account Balances Adjusting Adjustment Relationshio Adjustment Before Adjustment Entrv 1. Prepaid Asset and (a) Prepaid expense initially Asset overstated Dr. Expense Expense Expense recorded in asset account has Expense understated Cr. Asset been consumed; or, (b) Prepaid expense initially Asset understated Dr. Asset recorded in expense account Expense overstated Cr. Expense has not been consumed. 2. Unearned Liability and (a) Unearned revenue initially Liability overstated Dr. Liability Revenue Revenue recorded in liability account Revenue understated Cr. Revenue has been earned; or, (b) Unearned revenue ini- Liability understated Dr. Revenue tially recorded in revenue Revenue overstated Cr. Liability account has not been earned. 3. Accrued Expense and Expense incurred ha not Expense understated Dr. Expense Expense Liability been billed nor pai
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This note was uploaded on 12/03/2009 for the course ACG 3131 taught by Professor Rotella during the Spring '08 term at University of Central Florida.