Question

Fill in the t-accounts for each situation and label each transaction as Deferrals/Prepaid or Accrual. Calculate the adjusted balance and use a Bal. post reference to show the ending balance of each account.
a. Depreciation for the current year includes Equipment, $1,800. The Accumulated Depreciation -Equipment unadjusted balance as of December 31 is $5,000.
b. The unadjusted balance of Office Supplies at Dec. 31 is $9,200 and at year end the office supplies on hand totaled $300. c. The Service Revenue unadjusted balance as of December 31 is $11,300. The Unearned Revenue balance as of December 31 is $11,800.

Answer 1

Answer:

T-Accounts:

a) Accrual:

Depreciation Expense - Equipment

Account Title         Debit      Credit

Accumulated

Depreciation       $1,800

Accumulated Depreciation - Equipment

Account Title         Debit      Credit

Unadjusted balance           $5,000

Depreciation                          1,800

Bal                                       $6,800

b) Prepaid:

Office Supplies Expense

Account Title         Debit      Credit

Office Supplies   $8,900

Office Supplies

Account Title              Debit      Credit

Unadjusted balance  $9,200

Office supplies expense         $8,900

Bal.                               $300

c) Deferral:

Service Revenue

Account Title         Debit      Credit

Unadjusted balance          $11,300

Unearned Revenue

Account Title         Debit      Credit

Balance                               $11,800

Explanation:

Deferral of revenue, prepayment of expenses, and accrual of expenses and revenue are required under the accrual basis of accounting.  The accrual basis is supported by the accrual concept which requires that revenue and expenses are accounted or recognized in the period that they relate to and not when the cash is received or paid.