Adjusting (ACCRUALS AND DEFERRALS)

Accruals

1. Accrued Income

Already "RENDERED" (Service) or "GIVEN" (Product) but not yet received payment.

2. Accrued Expense

Already Incurred but not yet paid

Deferrals

1. Deferred / Prepaid Expense

- Already Paid but not yet incurred

2. Deferred / Prepaid Income

- Already receieved payment from customer but not yet rendered or given.

Accruals

1. Accrued Income Sample

Journal entry

Debit Notes Receivable

Credit Income

Adjusting (If paid)

Debit Cash

Credit Notes Receivable

Credit Interest Income

Adjusting (Not paid; Accounting Period)

Debit Interest Receivable

Credit Interest Income

2. Accrued expense Sample

Journal entry

Debit Cash

Credit Loans Payable

Adjusting (If paid)

Debit Loans Payable

Debit Interest Expense

Credit Cash

Adjusting (Not paid; Accounting Period)

Debit Interest Expense

Credit Interest Payable

Deferrals

1. Prepaid Or Deferred Expense Sample

1.A. (Asset Method)

Journal

Debit Prepaid Rent

Credit Cash

Adjusting; If incurred

Debit Rent Expense

Credit Prepaid Rent

1.B (Expense Method)

Journal

Debit Rent Expense

Credit Cash

Adjusting; If Incurred

Debit Prepaid Rent

Credit Rent Expense

2. Prepaid Or Deferred Income Sample

2. A (Revenue Method)

Journal

Debit Cash

Credit Revenue
Adjusting; If rendered

Debit Revenue

Credit Unearned Revenue

2.B Liability Method

Journal

Debit Cash

Credit Unearned Revenue

Adjusting; If rendered

Debit Unearned Revenue

Credit Revenue

Note: Sample Sections of Deferrals (2.A and 2.B) are not intended to the adjusting entries but rather they
are only intended to the simple adjustment when they are paid or Rendered/Given kaya kung
mapapansin nyo ay may cash. They are only given for you to know the concept of their own respective
methods.

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