Question

On December 31, the following data were accumulated for preparing the adjusting entries for Bellingham Realty:

•	The supplies account balance on December 31 is $5,865, The supplies on hand on December 31 are $1,330.
•	The unearned rent account balance on December 31 is $4,100 representing the receipt of an advance payment on December 1 of four months’ rent from tenants.
•	Wages accrued but not paid at December 31 are $2,030.
•	Fees earned but unbilled at December 31 are $18,090.
•	Depreciation of office equipment is $4,500.

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

Answer 1

Ans.(1)	Date	Accounts and Titles				Dr.($)	Cr.($)
	1)	Supplies Expenses				4,535
		To Supplies					4,535
		(Being supplies expenses at the end )
	2)	Unearned rent				1,025
		To Rent Revenue					1,025
		(Being 1 month rent revenue earned)
	3)	Wages Expenses				2,030
		To Outstanding Wages					2,030
		(Being wages outstanding at the end)
	4)	Accrued Income				18,090
		To Revenue Account					18,090
		(Being fees earned but unbilled)
	5)	Depreciatio Expenses				4,500
		To Office Equipment					4,500
		(Being depreciation charged on eqipment)
Ans.(2)	Adjusting entries are required every accounting period so that a company's financial statement reflect the ccrual method of accounting. And a Correcting entry is needed only if an error is discovered in an account. Correcting entries can involve any combination of income and balance sheet accounts.