Complete Question:
Refer to the work sheet in Problem 6-7A for Megaffin's Repairs. The trial balance amounts (before adjustments) have been entered in the ledger accounts provided in the working papers. If you are not using the working papers that accompany this book, set up ledger accounts and enter these balances as of January 31, 20--. A chart of accounts is provided below.
Assets
101 Cash
122 Accounts Receivable
141 Supplies
145 Prepaid Insurance
185 Delivery Equipment
185.1 Accum. Depr.—Delivery Equip
Revenues
401 Repair Fees
Liabilities
202 Accounts Payable
219 Wages Payable
Owner's Equity
311 Don Megaffin, Capital
312 Don Megaffin, Drawing
313 Income Summary
Expenses
511 Wages Expense
512 Advertising Expense
521 Rent Expense
523 Supplies Expense
525 Phone Expense
535 Insurance Expense
538 Gas and Oil Expense
541 Dept. Exp.—Delivery Equip. Owner's Equity
549 Miscellaneous Expense
Solution:
Adjustment of entries: Adjusting entries are those reported at the end of the year, in order to update revenue and expense (money) reports and balances (accounts, commitments and equity) in order to retain the documents in accordance with the concept of accrual basis.
Prepare adjusting entries at January 31:
Date Account Title and Explanation Post. Ref Debit ($) Credit ($) Jan31 Supplies expense (SE-) 593 300
Supplies (A-) 141 300
(To record cost of supplies used)
Jan31 Insurance Expense (SE-) 535 230
Prepaid Insurance (A-) 145 230\
(To record expired Insurance)
