Question

On March 31, the following data were accumulated to assist the accountant in preparing the adjusting entries for Potomac Realty:

• The supplies account balance on March 31 is $5,640, the supplies on hand on March 31 are $1,445.
• The unearned rent account balance on March 31 is $5,400 representing the receipt of an advance payment on March 1 of four months’ rent from tenants.
• Wages accrued but not paid at March 31 are $2,125.
• Fees accrued but unbilled at March 31 are $18,590.
• Depreciation of office equipment is $4,785.

Required:
a. Journalize the adjusting entries required on March 31. Refer to the Chart of Accounts for exact wording of account titles.
b. What is the difference between adjusting entries and correcting entries?

Answer 1

1. Adjusting journal entries on March 31.

Debit Credit

a. Supplies expenses $4,195

Supplies account $4,195

b. Unearned rent $1,350

Rent revenue $1,350

c. Wages Expense $2,125

Accrued Expenses $2,125

d. Account Receivable $18,590

Service revenue $18,590

e. Depreciation expense $4,785

Accumulated Depreciation - $4,785

Office equipment

Working:

a. Supplies account 5,640

Less: Supplies on hand 1,445

Supplies expense $4,195

b. Unearned rent on March 31= 5400 ; Rent for (Months)= 4

Per month Rent=$1,350

2. The difference between adjusting entries and Correcting entries is:

Adjusting entries are made to reflect the accrual method of accounting in preparing financial statement.

Correcting entry is made only when there is errors in accounts.