Adjusting, closing and correcting: journal entry worksheet
Name: Date:
Convention: United States (US textbooks)
Record each transaction as a journal entry: write each account in the Debit or the Credit column with its amount.
Accruing revenue earned but not yet invoiced
A maintenance company performed services worth $3,400.00 for a customer in December. The customer will be billed in January. Record the adjusting entry on December 31.
Assumptions: The company’s fiscal year ends on December 31. No sales tax applies.
Accounts to choose from: Accounts Receivable · Sales Revenue · Accounts Payable · Unearned Revenue · Service Revenue · Cash
Account Debit Credit Accruing electricity not yet invoiced at year end
On December 31 the electricity used by the store in December has not been billed yet. The meter reading gives a cost of $380.00; the bill will arrive in January. Record the adjusting entry on December 31.
Accounts to choose from: Utilities Expense · Cash · Rent Expense · Unearned Revenue · Utilities Payable · Prepaid Rent
Account Debit Credit Recognizing unearned revenue at year end
On November 1 a customer paid $3,600.00 in advance for six months of maintenance service (November through April), and the company credited Unearned Revenue. Record the adjusting entry on December 31.
Assumptions: The company’s fiscal year ends on December 31, and it adjusts its accounts only at year end.
Accounts to choose from: Unearned Revenue · Sales Revenue · Accounts Receivable · Prepaid Insurance · Service Revenue · Cash
Account Debit Credit Adjusting prepaid insurance at year end
On October 1 a company paid $2,400.00 for a one-year insurance policy (coverage October 1 through September 30) and debited Prepaid Insurance. Record the adjusting entry on December 31.
Assumptions: The company’s fiscal year ends on December 31, and it adjusts its accounts only at year end.
Accounts to choose from: Accounts Payable · Insurance Expense · Prepaid Insurance · Unearned Revenue · Rent Expense · Cash
Account Debit Credit Year-end straight-line depreciation
On January 1 a company bought a machine for $12,000.00. It has a useful life of 5 years and no salvage value. Record the depreciation for the year on December 31.
Assumptions: Depreciation is accumulated in Accumulated Depreciation. Straight-line depreciation for a full year.
Accounts to choose from: Accumulated Depreciation—Equipment · Repairs Expense · Depreciation Expense · Equipment · Cash · Loss on Disposal of Equipment
Account Debit Credit Adjusting office supplies to the year-end count
On January 1 the Supplies account had a balance of $600.00. Supplies bought during the year for $2,400.00 were debited to Supplies, and no supplies expense has been recorded this year. The count on December 31 finds supplies costing $450.00 on hand. Record the adjusting entry.
Assumptions: The company records supplies as an asset (Supplies) and recognizes the supplies used only at year end.
Accounts to choose from: Supplies · Inventory · Supplies Expense · Accounts Payable · Cash · Prepaid Insurance
Account Debit Credit Adjusting the allowance for doubtful receivables to its required balance
Before adjustment, the Allowance for Doubtful Accounts has a credit balance of $1,200.00. An aging of accounts receivable shows that the allowance should have a balance of $2,100.00. Record the adjusting entry at year end.
Assumptions: The company uses the allowance method and sets the allowance from an aging schedule (percentage-of-receivables approach).
Accounts to choose from: Cash · Accounts Receivable · Bad Debt Expense · Allowance for Doubtful Accounts · Notes Receivable · Sales Revenue
Account Debit Credit Accruing interest on a customer’s note at year end
A customer gave the company a six-month, 8% note for $12,000.00 3 months before December 31. Principal and interest are due at maturity. Record the interest earned to date at December 31.
Assumptions: Nothing has been recorded for the interest yet. Interest is computed in whole months: principal × rate × months / 12.
Accounts to choose from: Accounts Receivable · Interest Expense · Cash · Interest Receivable · Notes Receivable · Interest Revenue
Account Debit Credit Recording inventory shrinkage at year end
At year end a store’s inventory records show merchandise costing $42,500.00. The physical count finds goods costing only $41,820.00; the difference is due to theft and breakage. Adjust the records to the count.
Assumptions: Perpetual inventory: each sale also records its cost of goods sold. The count is correct and the records contain no posting errors.
Accounts to choose from: Inventory Shrinkage Expense · Accounts Receivable · Accounts Payable · Cash · Inventory · Cost of Goods Sold · Sales Revenue
Account Debit Credit Closing the revenue accounts to Income Summary
At year end, after the adjusting entries, a sole proprietorship’s only revenue accounts are Sales Revenue with a credit balance of $86,400.00 and Interest Revenue with a credit balance of $520.00. Close the revenue accounts to Income Summary.
Assumptions: The business closes its revenue and expense accounts through Income Summary.
Accounts to choose from: Cost of Goods Sold · Accounts Receivable · Sales Revenue · Owner’s Capital · Cash · Unearned Revenue · Income Summary · Interest Revenue
Account Debit Credit Closing the expense accounts to Income Summary
At year end, after the adjusting entries, a sole proprietorship’s only expense accounts are Salaries Expense with a debit balance of $42,600.00, Rent Expense with a debit balance of $14,400.00 and Utilities Expense with a debit balance of $3,180.00. Close the expense accounts to Income Summary.
Assumptions: The business closes its revenue and expense accounts through Income Summary.
Accounts to choose from: Owner’s Capital · Rent Expense · Income Summary · Salaries Payable · Utilities Expense · Owner’s Drawings · Cash · Salaries Expense
Account Debit Credit Closing net income to Owner’s Capital
A sole proprietorship has closed all revenue and expense accounts for the year to Income Summary, which now has a credit balance of $38,200.00. Close Income Summary to Owner’s Capital.
Accounts to choose from: Common Stock · Cash · Owner’s Capital · Income Summary · Retained Earnings · Owner’s Drawings
Account Debit Credit Closing a net loss to Owner’s Capital
A sole proprietorship has closed all revenue and expense accounts for the year to Income Summary, which now has a debit balance of $8,700.00. Close Income Summary to Owner’s Capital.
Accounts to choose from: Owner’s Capital · Cash · Income Summary · Owner’s Drawings · Common Stock · Retained Earnings
Account Debit Credit Closing Owner’s Drawings to Owner’s Capital
During the year the owner of a sole proprietorship withdrew $24,000.00 for personal use. At year end, Owner’s Drawings has a debit balance of $24,000.00. Close it to Owner’s Capital.
Accounts to choose from: Income Summary · Salaries Expense · Cash · Owner’s Capital · Owner’s Drawings · Retained Earnings
Account Debit Credit Reversing an accrued bonus at the start of the year
On December 31 the company accrued a bonus of $6,400.00 earned by its employees during the year, to be paid on February 28. The company uses reversing entries. Record the reversing entry on January 1 of the new year.
Assumptions: The December 31 entry debited Salaries Expense and credited Salaries Payable. Payroll taxes and withholdings are ignored in this item.
Accounts to choose from: Unearned Revenue · Salaries Payable · Payroll Tax Expense · Cash · Salaries Expense · Accounts Payable
Account Debit Credit Correcting a customer payment posted to the wrong account
A customer paid $3,630.00 on account by check. The bookkeeper debited Cash and credited Sales Revenue instead of Accounts Receivable. Record the correcting entry.
Assumptions: The original sale was recorded correctly when the goods were sold on account.
Accounts to choose from: Cost of Goods Sold · Accounts Receivable · Unearned Revenue · Cash · Accounts Payable · Sales Revenue
Account Debit Credit Correcting an insurance payment recorded at the wrong amount
The insurance premium for this month, $1,250.00, was paid by check, but the bookkeeper recorded the payment as $1,520.00: debit Insurance Expense, credit Cash. The check cleared the bank for $1,250.00. Record the correcting entry.
Assumptions: The premium covers this month only (nothing is prepaid).
Accounts to choose from: Bank Service Charges · Cash · Insurance Expense · Rent Expense · Prepaid Insurance · Accounts Payable
Account Debit Credit Recording the income tax for the year
A corporation’s income before income taxes for the year is $186,400.00, which is also its taxable income. The tax rate is 21%. The tax will be paid next year. Record the income tax for the year on December 31.
Assumptions: Federal income tax only; state income taxes and deferred taxes are ignored. No estimated tax payments were made during the year.
Accounts to choose from: Accounts Payable · Income Tax Expense · Employee Income Tax Payable · Retained Earnings · Income Tax Payable · Cash
Account Debit Credit Closing revenues and expenses directly to Retained Earnings
At year end, after all adjusting entries including income taxes, a service corporation’s only revenue and expense accounts are: Service Revenue $215,000.00 (credit balance), Salaries Expense $98,000.00, Rent Expense $18,000.00 and Income Tax Expense $12,250.00 (debit balances). Close them and transfer the net income to Retained Earnings in one compound entry.
Assumptions: The corporation closes its revenue and expense accounts directly to Retained Earnings.
Accounts to choose from: Income Tax Payable · Common Stock · Service Revenue · Salaries Expense · Cash · Income Tax Expense · Retained Earnings · Income Summary · Rent Expense
Account Debit Credit
Not in this convention: Settling VAT for the period
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