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Module 1: Balance day adjustments in the general journal and ledger

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Prepaid and Accrued Expenses

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Accounting - Topics - Prepaid and accrued expenses

Prepaid and accrued expenses

In this example $3000 advertising has been paid on 1 January 1999 for ten
advertisements in a magazine. At the end of the accounting period, three
months later, only seven advertisements have been placed.

The prepaid advertising expense is a current asset. [1]

You will need to be able to record in both the general journal and ledger,
showing the adjusting and closing entries. [2]

DATE
ACCOUNTS
DEBIT
CREDIT

1 Jan.
Prepaid advertising expense
3 000

Bank

3 000

Advertising prepaid

31 Mar.
Advertising expense
2 100

Prepaid advertising expense

2 100

Adjusting entry for advertising used

31 Mar.
Profit and Loss a/c
2 100

Advertising

2 100

Advertising posted to Profit and Loss a/c

1 Jan.
Bank
3 000
31 Mar.
Prepaid advertising
2 100

Balance
900

3 000

3 000

1 Apr.
Balance
900

31 Mar.
Prepaid advertising
2 100
31 Mar.
Profit and Loss summary a/c
2 100

31 Mar.
Advertising expense
2 100

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Links:
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[1] http://alison.com/#
[2] http://alison.com/#