Chapter 4, Problem 4.7BE

To determine

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.

Unearned Service Revenue

Unearned service revenue is the revenue which is earned in advance, ahead of rendering the service. As per the revenue recognition principle it is not recorded in the books of accounts. This is a liability for the business.

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.

To journalize and post: The given transaction is to be posted to ledger on 1^st July and passing adjusting entry on 31^st December for Company N.