MGAB01H3 Chapter : Adjusting Entries for Accruals

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27 Oct 2010
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MGAB01H3 Full Course Notes
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The adjusting entry for accruals will increase both a balance sheet and an income statement account. Revenues earned, but not yet received in cash or recorded at the statement date, are accrued revenues. An adjusting entry is required for two purposes : to show the receivable that exists at the balance sheet date, and to record the revenue that has been earned during the period. The adjusting entry results in a debit (increase) to an asset account and a credit (increase) to a revenue account. Expenses incurred but not yet paid or recorded at the statement date are called accrued expenses (i. e. interest, rent, taxes) The adjusting entry for accrued expenses results in a debit (increase) to an expense account and a credit (increase) to a liability account. According to the matching principle, a portion of the cost of a capital asset should be.

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