Accounting: Tools for Business Decision Making, 5th Edition

Published by Wiley
ISBN 10: 1118128168
ISBN 13: 978-1-11812-816-9

Chapter 4 - Accrual Accounting Concepts - Brief Exercises - Page 201: BE4-3


(a) Supplies of 400 USD are on hand. Supplies account shows 1,900 USD balance. (b) Service revenue earned but unmilled total 700 USD. (c) Interest of 300 USD has accumulated on a note payable. (d) Rent collected in advance totaling 1,100 USD has been earned.

Work Step by Step

(a) 1. Prepaid expenses 2. Supplies account - overstated Supplies expenses - understated (b) 1. Accrued revenues 2. Accounts receivable account (asset) - understated Revenue account - understated (c) 1. Accrued expense 2. Expenses account - understated Liability account - understated (d) 1. Unearned revenues 2. Liability account - overstated Rent revenue account - understated
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