The Adjustment Process:-

Accountants prepare a trial balance both before and after making adjusting entries. Reexamine the
Greener Landscape Group's unadjusted trial balance for April 30, 20X2.

Trial Balance
Account Debit Credit

Cash $ 6,355

Accounts Receivable 150

Supplies 50

Prepaid Insurance 1,200

Equipment 3,000

Vehicles 15,000

Accounts Payable $ 50

Unearned Revenue 270

Notes Payable 10,000

J. Green, Capital 15,000

J. Green, Drawing 50

Lawn Cutting Revenue 750

Wages Expense 200

Gas Expense 30

Advertising Expense 35

$26,070 $26,070

Consider eight adjusting entries recorded in Mr. Green's general journal and posted to his general ledger
accounts. Then, see the adjusted trial balance, which shows the balance of all accounts after the
adjusting entries are journalized and posted to the general ledger accounts.
Adjustment A: During the afternoon of April 30, Mr. Green cuts one lawn, and he agrees to mail the
customer a bill for $50, which he does on May 2. In accordance with the revenue recognition principle,
Mr. Green makes an adjusting entry in April to increase (debit) accounts receivable for $50 and to
increase (credit) lawn cutting revenue for $50.

Adjustment B: Mr. Green's $10,000 note payable, which he signed on April 2, carries a 10.2% interest
rate. Interest calculations usually exclude the day that loans occur and include the day that loans are
paid off. Therefore, Mr. Green uses the formula below to calculate how much interest expense accrued
during the final twenty-eight days of April.

Since the matching principle requires that expenses be reported in the accounting period to which they
apply, Mr. Green makes an adjusting entry to increase (debit) interest expense for $79 and to increase
(credit) interest payable for $79
Adjustment C: Mr. Green's part-time employee earns $80 during the last four days of April but will not
be paid until May 10. This requires an adjusting entry that increases (debits) wages expense for $80 and
that increases (credits) wages payable for $80.
Adjustment D: On April 20 Mr. Green received a $270 prepayment for six future visits. Assuming Mr.
Green completed one of these visits in April, he must make a $45 adjusting entry to decrease (debit)
unearned revenue and to increase (credit) lawn cutting revenue.

Adjustment E: Mr. Green discovers that he used $25 worth of office supplies during April. He therefore
makes a $25 adjusting entry to increase (debit) supplies expense and to decrease (credit) supplies.
Adjustment F: Mr. Green must record the expiration of one twelfth of his company's insurance policy.
Since the annual premium is $1,200, he makes a $100 adjusting entry to increase (debit) insurance
expense and to decrease (credit) prepaid insurance.

Adjustment G: If depreciation expense on Mr. Green's $15,000 truck is $200 each month, he makes a
$200 adjusting entry to increase (debit) an expense account (depreciation expense–vehicles) and to
increase (credit) a contra-asset account (accumulated depreciation–vehicles).
The truck's net book value is now $14,800, which is calculated by subtracting the $200 credit balance in
the accumulated depreciation–vehicles account from the $15,000 debit balance in the vehicles account.
Many accountants calculate the depreciation of long-lived assets to the nearest month. Had Mr. Green
purchased the truck on April 16 or later, he might not make this adjusting entry until the end of May.

Adjustment H: If depreciation expense on Mr. Green's equipment is $35 each month, he makes a $35
adjusting entry to increase (debit) depreciation expense–equipment and to increase (credit)
accumulated depreciation–equipment.

After journalizing and posting all of the adjusting entries, Mr. Green prepares an adjusted trial
balance. The Greener Landscape Group's adjusted trial balance for April 30,20X2 appears below.
 The Greener Landscape Group Adjusted Trial Balance April 30,20X2
Account Debit Credit

Cash $ 6,355

Accounts Receivable 200

Supplies 25

Prepaid Insurance 1,100

Equipment 3,000

Accumulated Depreciation–Equipment $ 35

Vehicles 15,000

Accumulated Depreciation–Vehicles 200

Accounts Payable 50

Wages Payable 80

Interest Payable 79

Unearned Revenue 225

Notes Payable 10,000

J. Green, Capital 15,000

J. Green, Drawing 50

Lawn Cutting Revenue 845

Wages Expense 280

Gas Expense 30

Advertising Expense 35

Interest Expense 79

Supplies Expense 25

Insurance Expense 100

Depreciation Expense–Equipment 35

Depreciation Expense–Vehicles 200

$26,514 $26,514