Under the asset method, a prepaid expense account (an asset) is recorded when the amount is paid. For this service, New Corp agrees to pay commissions of 5% of sales with payment made 10 days after the month ends. Example of an Accrual Adjusting Entry for Expenses. There are two ways of recording prepayments: (1) the asset method, and (2) the expense method. The adjusting entry for Accounts Payable in general journal format is: The balance in the liability account Accounts Payable at the end of the year will carry forward to the next accounting year. Explanation: Accrued expenses are ex view the full answer c. expense account and a credit to a liability account. Liability/expense adjustments—involves accrued liabilities. To make sure that the expenses of an accounting period are matched with the revenues, entries are made at the end of an accounting period to “adjust” the account balances accordingly. Prepayments: In your general ledger, the adjustment looks like this. There are two types of adjusting entries: 1. The purpose of adjusting entries: According to accrual concept of accounting, revenue is recognized in the period in which it is earned and expenses are recognized in the period in which they are incurred.Some business transactions affect the revenue and expenses of more than one accounting period. Adjusting entries allow you to adjust income and expense … c. To illustrate, let's assume that New Corp begins its business on December 1 and uses Sales Rep Company for calling on customers. Example 3- Salaries go From Accrued Liabilities to Accrued Expenses. For example, a service providing company may receive service fee from its clients for more … Adjusting Entries – Why Do We Need Adjusting Journal Entries? Adjusting Entries. Accrued liabilities are liabilities not yet recorded at the end of an accounting period.They represent obligations to make payments not legally due at the balance sheet date, such as employee salaries. The adjusting entry for prepaid expense depends upon the journal entry made when it was initially recorded. The balance in Repairs & Maintenance Expense at the end of the accounting year will be closed and the next accounting year will begin with $0. 25. d. liability account and a credit to an expense account. Types. debit to an expense credit to an expense credit to a liability debit to a liability debit to an asset credit to a revenue\ See answer Tanai3378 is waiting for your help. An adjusting entry to record an accrued expense involves a debit to a(an): a. expense account and a credit to a prepaid account. An adjusting entry for accrued expenses involves: (Select all that apply.) b. There are following types of adjusting entries: Accruals: These include revenues not yet received nor recorded and expenses not yet paid nor recorded. –––– To record revenue earned that was previously received as cash in advance. 26. a. An adjusting entry always involves either income or expense account. Adjusting entries are required at the end of each fiscal period to align the revenues and expenses to the “right” period, in accord with the matching principle Matching Principle The matching principle is an accounting concept that dictates that companies report expenses at the same time as the revenues they are related to. –––– To record annual depreciation expense. b. expense account and a credit to Cash. First, you make an adjusting entry, moving the revenue from a “holding account” (accrued receivables) to a revenue account (revenue.) Adjusting entries are Step 5 in the accounting cycle and an important part of accrual accounting. For example, interest expense on loan accrued in the current period but not yet paid. Classify the following adjusting entries as involving prepaid expenses (PE), unearned revenues (UR), accrued expenses (AE), or accrued revenues (AR). Example adjusting entry. Asset Method. 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