Explanation Unearned Revenue: Unearned revenue is the revenue which is earned in advance, ahead of goods supplied or services performed. As per the revenue recognition principle it is not recorded in the books of accounts until earned. Hence, this is considered as a liability for the business. Adjusting Entries : Adjusting entries indicates those entries, which are passed in the books of accounts at the end of one accounting period. These entries are passed in the books of accounts as per the revenue recognition principle, and the expenses recognition principle to adjust the revenue, and the expenses of a business in the period of their occurrence. Rule of Debit and Credit: Debit - Increase in all assets, expenses & dividends, and decrease in all liabilities and stockholders’ equity . Credit - Increase in all liabilities and stockholders’ equity, and decrease in all assets & expenses. The adjusting entry for rent revenue is as follows: Date Account Titles and Explanation Debit ($) Credit ($) December 31, 2016 Unearned Rent 11,025 Rent Revenue (1) 11,025 (To record the revenue earned from rent at the end of the accounting period.) Table (1) The impact on the accounting equation for the above referred adjusting entry is as follows: Assets = { Liabilities − $11,025 } + { Stockholders'equity +$11,025 } Unearned Rent is a liability, and it is decreased by $11,025

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ISBN: 9781305088436

Author: Carl Warren, Jim Reeve, Jonathan Duchac

Publisher: Cengage Learning

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Chapter 3, Problem 4PEB

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Record the given adjustment related to the unearned rent is recorded in the journal of the company H.

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Financial Accounting

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Record the given adjustment related to the unearned rent is recorded in the journal of the company H.

Solution Summary: The author explains that unearned rent is a liability and is recorded in the journal of the company H.

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