Chapter 3, Problem 3PSB

To determine

Adjusting Entries: Adjusting entries are made at the end of the year to adjust the financial position of the enterprise according to the accrual basis of accounting.

Accounting rules regarding journal entries:

• Balance increases when: Assets, losses, and expenses get debited and liabilities, gains, and revenue get credited.
• Balance decrease when: Assets, losses, and expenses get credited and liabilities, gains, and revenue get debited.

Journal Entries: It is a book of original entries. It records and summarizes the financial transaction of an entity chronologically, generally according to the dual aspect of accounting.

Adjusted Trial Balance: It is a statement that contains balances of all account after all the adjusting entries has been made.

Income Statement: It is a financial statement that shows the profit and loss made by the firm in a particular accounting period.

Retained Earnings: It is a financial statement that shows the amount of profit retained by the company for future unforeseen events.

1.

To prepare: T-account with balances of unadjusted trial balance.

2.

To determine

To prepare: Adjusting entries.

3.

To determine

To prepare: Ledger account and trial balance.

4.

To determine

To prepare: Income statement and statement of retained earnings and balance sheet.