Question

The Krug Company collected $6,000 rent in advance on November 1, debiting Cash and crediting Unearned Rent Revenue. The tenant was paying one year’s rent in advance and occupancy began November 1.

Answer 1

Concepts and reason

Journalizing is the process of recording of business transactions in chronological order.

Journal entries are recorded as per the double entry system; which means for every debit to an account there would be a corresponding credit. Recording of journal entry is the first step in the accounting cycle; post which, the accounts are posted to the respective ledger on the basis of which the financial statements are prepared.

Fundamentals

Adjusting Entries: Adjusting entries are those journal entries which are made at the end of the accounting year. These entries are made in order to make the books of accounts more appropriate as per the accrual accounting concept. No cash account is used as adjusting entries involves debiting/crediting of the existing accounts for making the books as per the

1.

Calculate the Earned rental income as provided below:

$\begin{array}{c}\\{\rm{Unearned rent revenue received on Nov}}{\rm{. 1}} = \$ 6,000\\\\{\rm{Earned rental income as on Dec}}{\rm{. 31}} = \frac{{\$ 6,000 \times 2{\rm{ months}}}}{{12{\rm{ months}}}}\\\\ = \$ 1,000\\\end{array}$

Prepare the adjusting journal entry to record the rental income earned as provided below:

Ans: