Types of Adjusting Entries

1. Accrued revenues

If a business has earned $5,000 of revenues, but they are not recorded as of the end of the accounting period, the accrual-type adjusting
entry will be as follows:

2. Accrued expenses

On December 1, X borrowed money from Y 40,000 with 6% interest annually. (40,000x6%x1/12)

3. Deferred revenues

On December 1, X receives 4,000 from Y for services to be rendered on January 1.

Cash 4000
Deferred Revenue 4,0000

Deferred Revenue 1, 000

Service Revenue 1,000

4. Deferred expenses

A new company pays $6,000 on December 1 for the insurance on its vehicles for the six-month period beginning January 1. (6,000/6)

Prepaid Expense 6,000

Cash 6,000

5. Depreciation expense

X acquires machinery at a cost of 40,000. The machinery has a life of 10 years with 10,000 residual value.

Depreciation expense 3,000

Accumulated Depreciation 3,000
(40,000-10,000)/10= 3,000
ABC Company shows a balance of $3,000 in the Supplies (asset) account. A physical count indicates
$1,000 of supplies on hand at the end of the fiscal period. Journalize the required adjustment for
supplies.

Supplies Expense 2000

Supplies 2000

ABC Company paid $2,400 for a two-year insurance policy on January 1 of the current year. Prepare the
required adjustment for the expired insurance at the end of the current year.

Insurance Expense 1200

Prepaid Insurance 1200

ABC Company has a $10,000 note payable due March 15 of next year. The note originated on July 1 of
the current year and bears interest at the rate of 5%. Prepare the required journal entry to recognize
interest expense.

Interest Expense 250

Interest Payable 250

ABC Company received $36,000 on January 1 of the current year for a project to be completed over the
next two years. Journalize the adjustment to recognize the income earned on this project at the end of
the current year.

Unearned Fees 18000

Fees Earned 18000

ABC Company has performed $12,000 of services that have not been billed as of fiscal year-end. Prepare
the adjusting entry to record the fees earned.

Accounts Receivable 12000

Fees Earned 12000