ADJUSTING ENTRIES

Categories of adjusting entries :

Deferrals

1. Prepaid Expenses : Expenses paid in cash and recorded as assets before they are used.
2. Unearned Revenues : Cash received and recorded as liabilities before revenue is earned.

Accruals

1. Accrued Revenues : Revenues earned but not yet received in cash or recorded.
2. Accrued Expenses : Expenses incurred but not yet paid in cash or recorded.

Exercise
Tony Masasi started his own consulting firm, Masasi Company, Inc. on June 1, 2019. The trial balance at June 30 is
shown below.
MASASI COMPANY, INC.
Trial Balance
June 30, 2019
Account Number Acoount Titles Debit Credit
101 Cash $ 7,150  
112 Accounts Receivable 6,000  
126 Supplies 2,000  
130 Prepaid Insurance 3,000  
157 Office Equipment 15,000  
201 Accounts Payable   $ 4,500
209 Unearned Service Revenue   4,000
311 Share Capital – Ordinary   21,750
400 Service Revenue   7,900
726 Salaries Expense 4,000  
729 Rent Expense 1,000  
  $38,150 $38,150

In additional to those accounts listed on the trial balance, the chart of accounts for Masasi Company, Inc. also
contains the following accounts and account numbers: No.158 Accumulated Depreciation-Office Equipment , No.212
Salaries Payable, No.224 Utilities Payable, No.631 Supplies Expense, No.711 Depreciation Expense-Office Equipment,
No.722 Insurance Expense, and No.732 Utilities Expense.Other data:
1. Supplies on hand at June 30 are $600
2. A utility bill for $150 has not been recorded and will not be paid until next month
3. The insurance policy is for a year
4. $2,500 of unearned service revenue has been earned at the end of month
5. Salaries of $2,000 are accrued at June 30
6. The office equipment has a 5-year life with no salvage value. It is being depreciated at $250 per month for 60
month
7. Invoices representing $1,000 of services performed during the month have not been recorded as for June 30.
Instruction
(a) Prepare the adjusting entries for the month of June. Use J3 as the page number of your journal.
(b) Post the adjusting entries to the ledger accounts. Enter the totals from the trial balance as beginning account
balances and place a check mark in the posting reference column.
(c) Prepare an adjusted trial balance at June 30, 2019.