Answer:
a. Entry to record revenue earned that was previously received as cash in advance.
Debit Unearned Revenue
Credit Revenue
Revenue is an Income Statement account.
Unearned Revenue is a Balance Sheet account
b. Entry to record wage expenses incurred but not yet paid (nor recorded).
Debit Wages Expenses Account
Credit Wages Payable Account
Wages Expense is an Income Statement account.
Wages Payable is a Balance Sheet account.
c. Entry to record revenue earned but not yet billed (nor recorded).
Debit Accounts Receivable
Credit Revenue
To record revenue earned.
d. Entry to record expiration of prepaid insurance:
Debit Insurance Expense
Credit Prepaid Insurance
To record insurance expense for the period.
e. Entry to record annual depreciation expense:
Debit Depreciation Expense
Credit Accumulated Depreciation
To record depreciation charge for the month.
Explanation:
The adjustment of expenses and income is important in order to base the financial statements on the accrual concept and the matching principle. The cash basis records transactions when cash is exchanged, rather than when the contract becomes effective.
