Question

The following balance date adjustments are required for the year ended 31 December 2015 (i) Rent income received in advance on 31 December 2015 amounted to $2,000. (ii) A bad debt of $2,750 (including GST) is to be written off. (ii) The liability for long service leave is to be increased by $5,000. (iv) Annual insurance premium of $6,000 was paid on 30 September 2015. Record the prepaid amount at 31 December 2015. Sales commission of $3,500 that had been earned by the business had not been received at 31 December 2015. (v) Required: Prepare general journal entries for the above balance date adjustments.

Answer 1

1) cash a/c. Dr 2000

To rent received in advance a/c 2000

(Rent received in advance)

2) Allowance for bad and doubtful debts A/c Dr 2750

To debtors a/c 2750

(Bad debts written off including gst)

3) long service leave accrual expense a/c Dr 5000

To provision for long service leave a/c 5000

(Increase in liability for long service leave)

4)Insurance expense a/c 4500

Prepaid insurance a/c dr 1500

To cash a/c 6000

(Annual insurance premium paid with prepaid insurance for 3 months)

5)No journal entry is required as the income has not yet been received and is only accrued,therefore no journal entry

( Insurance was paid in advance for three months)