Question

justing entries

Instructions

Chart of Accounts

Journal

Final Question

Instructions

On March 31, the following data were accumulated to assist the accountant in preparing the adjusting entries for Potomac Realty:

a.	The supplies account balance on March 31 is $5,640, the supplies on hand on March 31 are $1,445.
b.	The unearned rent account balance on March 31 is $5,400 representing the receipt of an advance payment on March 1 of four months’ rent from tenants.
c.	Wages accrued but not paid at March 31 are $2,125.
d.	Fees accrued but unbilled at March 31 are $18,590.
e.	Depreciation of office equipment is $4,785.

	Required:
1.	Journalize the adjusting entries required on March 31. Refer to the Chart of Accounts for exact wording of account titles.
2.	What is the difference between adjusting entries and correcting entries?

Chart of Accounts

CHART OF ACCOUNTS
Potomac Realty
General Ledger
ASSETS 11 Cash 12 Accounts Receivable 13 Supplies 14 Prepaid Insurance 15 Land 16 Equipment 17 Accumulated Depreciation-Office Equipment 19 Accumulated Depreciation-Automobiles LIABILITIES 21 Accounts Payable 22 Unearned Rent 23 Wages Payable 24 Taxes Payable EQUITY 31 Owner, Capital 32 Owner, Drawing	REVENUE 41 Fees Earned 42 Rent Revenue EXPENSES 51 Advertising Expense 52 Insurance Expense 53 Rent Expense 54 Wages Expense 55 Supplies Expense 56 Utilities Expense 57 Depreciation Expense 59 Miscellaneous Expense

Answer 1

(1).

	Account Titles & Explanation	Debit	Credit
(a).	Supplies Expenses ($5640 – $1445)	$4195
	Supplies		$4195
	(Adjusting entry for used supplies)
(b).	Unearned Rent ($5400 / 4)	$1350
	Rent Revenue		$1350
	(Adjusting entry for unearned rent)
(c).	Wages Expense	$2125
	Wages Payable		$2125
	(Adjusting entry for wages expense)
(d).	Accounts Receivable	$18590
	Fees Earned		$18590
	(Adjusting entry for earned fees)
(e).	Depreciation Expense	$4785
	Accumulated Depreciation-Office equipment		$4785
	(Adjusting entry for depreciation)

(2).

Difference between adjusting entries and correcting entries;

Adjusting entries are made at the end of accounting period to reflect accrual method of accounting. Adjusting entries are made for accrue expenses and losses, accrue revenues and gains, defer expenses, defer revenues, depreciation expense and bad debts expense etc.

Correcting entries are made for correcting discovered errors in an account. Normally correcting entries are made for correcting an erroneous amount and for correcting an entry that was recorded in the wrong account etc.