Chapter 3, Problem 3.2AP

(a)

To determine

Adjusting entries:

Adjusting entries are those entries which are made at the end of the period to update all the balances in the financial statements to show the true financial information and to maintain the records according to accrual basis principle

Accounting rules for journal entries:

1. a) To record an increase in account balance: Debit assets, expenses, losses and credit all liabilities, capital, revenue and gains.
2. b) To record a decrease in account balance: Credit assets, expenses, losses and debit all liabilities, capital, revenue and gains.

Adjusted Trial Balance: Adjusted Trial balance is that statement which contains complied list of accounts with their adjusted balances after all relevant adjustments have been made. This statement is prepared at the end of every financial period.

Income Statement: The income statement is that financial statement which shows the net income (or loss) of the Company. In the income statement, to calculate the net income, all expenses incurred by the Company are deducted from the total income of the Company.

To journalize: Adjusting entries of S Motel on May 31, 2015

(b)

To determine

To post: The Adjusting entries into ledger accounts for S Motel on May 31, 2015.

(c)

To determine

To prepare: Adjusted trial balance of S Motel on May 31, 2015

(d)

To determine

To prepare: Income statement, Retained earnings statement, and balance sheet of S Motel on May 31, 2015