Chapter 3, Problem 3.4BPR

To determine

Adjusting entries:

Adjusting entries refers to the entries that are made at the end of an accounting period in accordance with revenue recognition principle, and expenses recognition principle.  All adjusting entries affect at least one income statement account (revenue or expense), and one balance sheet account (asset or liability).

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

• Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and owner’s equities.
• Credit, all increase in liabilities, revenues, and owners’ equities, all decrease in assets, expenses.

To prepare: The adjusting entries in the books of Company S at the end of the year.