Year-End adjusting entries?

USA Discussion in 'Exams and Studying' started by Andrew Graber, Sep 26, 2016.

  1. Andrew Graber

    Andrew Graber

    Joined:
    Sep 26, 2016
    Messages:
    3
    Likes Received:
    0
    So I'm working on my homework for Financial Accounting class, and I've come across a question that is stumping me. It involves a company receiving payment for 10 months of service half way through the year. I would assume this means that at the end of each month, there would be an adjusting entry to debit service revenue and credit deferred revenue for 1/10 of the total amount. However, the question is asking me to record the year-end adjusting entry for this. I would assume there would be no adjusting entry because it is a monthly payment and revenue is recorded when the service is performed. Am I wrong?
     
    Andrew Graber, Sep 26, 2016
    #1
    1. Advertisements

  2. Andrew Graber

    Triest123 VIP Member

    Joined:
    Feb 12, 2012
    Messages:
    269
    Likes Received:
    49
    I think your question recognised all the payments received as revenue, so you need to make a year ended adjustment to reclass some payment received as "unearned revenue"
     
    Triest123, Sep 26, 2016
    #2
    1. Advertisements

  3. Andrew Graber

    MissBalanceSheet

    Joined:
    Sep 26, 2016
    Messages:
    2
    Likes Received:
    0
    Location:
    kentucky
    Agree with Triest123. Your adjusting entry concerns the remaining 4 months of service due to the customer. The company received 10 months of payment in July and booked it as "revenue" in July. At the end of the year 6 of the 10 months of prepaid service has been completed. The adjusting entry will be to move the remaining 4 months of revenue to unearned/deferred revenue accounts because the company has yet to perform the service.
     
    MissBalanceSheet, Sep 26, 2016
    #3
  4. Andrew Graber

    Andrew Graber

    Joined:
    Sep 26, 2016
    Messages:
    3
    Likes Received:
    0
    Sorry, I failed to mention that the question specifically stated that the company credited deferred revenue when they received the money.
     
    Andrew Graber, Sep 26, 2016
    #4
  5. Andrew Graber

    Triest123 VIP Member

    Joined:
    Feb 12, 2012
    Messages:
    269
    Likes Received:
    49
    You should make an adjusted entry
    Dr Unearned/Deferred revenue
    Cr Service income
    (Being recognised the service income for 6 month)
     
    Triest123, Sep 27, 2016
    #5
    1. Advertisements

Want to reply to this thread or ask your own question?

You'll need to choose a username for the site, which only take a couple of moments (here). After that, you can post your question and our members will help you out.
Similar Threads
  1. William Brenner
    Replies:
    7
    Views:
    1,632
    Phil Marti
    Dec 6, 2006
  2. James Stewart

    year end entries for vehicle loan

    James Stewart, Jan 5, 2006, in forum: Quickbooks
    Replies:
    8
    Views:
    491
    Michael
    Jan 10, 2006
  3. SS
    Replies:
    1
    Views:
    308
  4. Allan Leedy

    Year-end entries Quicken 2007

    Allan Leedy, Jan 5, 2008, in forum: Quicken
    Replies:
    2
    Views:
    500
    Art Matz
    Jan 5, 2008
  5. Brian Pellerin

    Home Sale / Loan Payoff Adjusting Entries

    Brian Pellerin, Jan 9, 2005, in forum: Microsoft Money
    Replies:
    6
    Views:
    1,296
    Dick Watson
    Jan 11, 2005
  6. Thunderbird
    Replies:
    2
    Views:
    728
    Ron Rosenfeld
    Dec 28, 2012
  7. pacard
    Replies:
    0
    Views:
    1,240
    pacard
    Mar 8, 2014
  8. Angie

    USA Adjusting prior year mis-steps on current year tax return

    Angie, Apr 7, 2016, in forum: General Accountancy Discussion
    Replies:
    0
    Views:
    231
    Angie
    Apr 7, 2016
Loading...