Question

Which of the following events would not require an end-of-year adjusting entry?

(I know the answer is A, but can you give me an explanation on why it is A) Thank you!

A) Providing services on account

B) Paying for one year's rent on July 1

C) Purchasing supplies for cash

D) Each of these answer choices would require an end-of-year adjustment

Answer 1

Adjusting entry is not required for providing services on accounts, as accounts receivable is debited while crediting service revenue. There is no adjustment required when cash is actually received, cash is debited and accounts receivable is credited

But adjustment entry is required for Paying one year rent in advance, since on payment prepaid rent is recorded, and adjustment entry is made at end for prepaid rent expired during the period.

Similarly adjusting entry is required for supplies consumed during the period.