Chapter 3, Problem 3.7BE

To determine

Adjustment entries: Adjusting entries are those entries which are made at the end of the year 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.

Adjusting entries for following on December 31:

1. 1. Interest on notes payable of $400 is accrued.
2. 2. Services performed but not recorded total $1,900.
3. 3. Salaries earned by employees of $900 have not been recorded.