3. Adjusting Process

3. Adjusting Process - CHAPTER3 ADJUSTINGPROCESS ,...

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CHAPTER 3 ADJUSTING PROCESS At the end of the accounting period, many of the balances of accounts in the ledger can be  reported without change in the financial statements. Some accounts, however, require updating.  All adjusting entries (other than error corrections) will affect one account on the balance sheet  (Asset or Liability) and one account on the income statement (Revenue or Expense).    1. Prepaid revenue:  are Assets (supplies, pre-paid insurance, prepaid advertisement, pre- paid interest) that will eventually become expenses overtime.  The asset becomes  consumed and becomes an expense.  Example:  The supplies account currently shows a $300 balance. A count of the supplies  determines that only $250 remains. DR CR Supplies Expense 50                    Supplies                          Supplies (300-250)                    50 2. Unearned Revenues:  are Liabilities (tuition, magazine subscription, unearned rent)  amounts received prior to being earned.    Example:   CPA previously received $500 for bookkeeping services in advance of  providing the services. Adams has now earned $300 of the money. DR
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3. Adjusting Process - CHAPTER3 ADJUSTINGPROCESS ,...

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