Chapter 4, Problem 4.4BE

To determine

Adjusting entries:

An adjusting entry is prepared when the trial balance is not up-to-date, and complete, and they are usually prepared at the end of the accounting period. This adjusting entry is essential for preparing the financial statements of the business.

Types of adjusting entries:

There are two types of adjusting entries, they are:

• Accruals and,
• Deferrals.

These can be further classified into two types as follows:

1. 1. Deferrals – Prepaid expenses, and unearned revenue.
2. 2. Accruals – Accrued revenues, and accrued expenses.

(1) and (2)

To indicate: The type of adjustment, and the status of the accounts before adjustment.