Explanation Journal entry : Journal is the primary record of the business transaction in chronological (date wise) order. Journal entry contains two effects one is debit and other is credit, under double entry book keeping system. Procedure for debiting and crediting an account: Increase in assets account, increase in expenses account, and decrease in liabilities account should be debited. Decrease in assets account, increase in revenue account, and increase in liabilities account should be credited. All transactions affect the accounting equation that is displayed below. The accounting equation should always remain in balance at the time of recording a business transaction: Prepare the journal entries as shown below. Payment of prepaid insurance related to insurance policy from January 1, 2018 to December 31, 2018: Date Particulars L/F Debit ($) Credit ($) - Insurance expense $14,000 Prepaid insurance $14,000 (To record prepaid insurance adjustment) Table (1) Insurance expense is debited, as it increases the expense account. Prepaid insuranceis credited, as it decreases the asset account. Prepaid rent paid in July: Date Particulars L/F Debit ($) Credit ($) - Rent expense $480,000 Prepaid rent $480,000 (To record payment of prepaid rent) Table (2) Rent expense is debited, as it increases the expense account. Prepaid rent is credited, as it decreases the asset account...

2nd Edition

ISBN: 9780134730370

Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella

Publisher: PEARSON

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Chapter 4, Problem 4.14E

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To prepare: The journal entries for the adjustments made at the year end.

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The journal entries for the adjustments made at the year end.

Solution Summary: The author explains that journal entries are the primary record of the business transaction in chronological (date wise) order.

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To prepare: The journal entries for the adjustments made at the year end.

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