Typical Transaction 5
Example: Adjustment for Prepaid Expenses – Example: 9,300 Rent and Insurance Prepayment, adjustment for the month: 1,000 monthly rent + 200 monthly insurance = 1,200
The entries for this transaction in the Accounting System can be seen here, in the AccountingLab and in the Accounting System, Operation O1, M1:
| Adjustment for Prepayment for office costs and insurance | Decrease in Asset (Prepayments) (-) |
|---|---|
| Decrease in Retained Earnings (-) |
> Enter 1,000 in field “Rent Month 1” and 200 in the filed “Insurance Month 1”
> Double entry: Credit entry, Debtors and Prepayments decreases by one thousand and two hundred, Debit entry, Retained Earnings Account decreases by one thousand and two hundred
> Values in red show Balance Sheet values before and after changes
> Double entry: Credit entry, Debtors and Prepayments decreases by one thousand and two hundred, Debit entry, Retained Earnings Account decreases by one thousand and two hundred
> Values in red show Balance Sheet values before and after changes
| Balance Sheet | ||
|---|---|---|
| Original | After Changes | |
| Assets | ||
| Current Assets | 767,850 | 766,650 |
| Bank | 758,550 | 758,550 |
| Debtors and Prepayments | 9,300 | 8,100 |
| Other Current Assets (Stock) | 0 | 0 |
| Fixed Assets | 44,000 | 44,000 |
| TOTAL ASSETS | 811,850 | 810,650 |
| Liabilities | ||
| Current Liabilities | 44,300 | 44,300 |
| Creditors | 44,000 | 44,000 |
| Accruals | 300 | 300 |
| Long Term Liabilities | 0 | 0 |
| Long Term Loan | 0 | 0 |
| Equity | 767,550 | 766,350 |
| Shareholders’ Equity | 800,000 | 800,000 |
| Income Statement | -32,450 | -33,650 |
| TOTAL Liabilities + Equity + Retained Earnings | 811,850 | 810,650 |