124 Principles of Accounting Kauai Communty Colege ACC 124-PRINCIPLES DF ACCOUNTING Ann Y. Kennedy, CPA, MBA CH 5 TYPES OF AJES s Normally, AJEs do not invave cash, and are posted at the end of the acenunting period o Normally, AJEs inclade a bal sht account and an ine stmt account o 3-steps for AES: 1)Look at current account balance of bal sht halding account 2) Determine what amount the account should be adjusted to 3) Caloulate AlE amount and record to properly reflect the correct acenu A. Unearned Revenue Scenarie: On 10/1 A The accounting firm will provide services after the tax extension E: Dr Cash unty Mary wants her 2014 tax return amended and leaves a $1,000 deposit deadine passes in 3 months. 1,000 Cr Unearned revenue curr lisb 1,000 10/1 record deposit received for future tax services for Aunty Mary en tax services are complated, an AJE&pasted. Record the AJE on 12/31 Other scenarias: sale of magazine subscriptions, concert tickets, home construction timing ssues B. Prepaid Expense Scenario 1:On 12/1 the business pays $2,400 for 24 months of insurance JE: Dr Prepaid insurance (curr asset) 2400 Cr Cash 12/1 record payment made in advance for insurance in advance for i240 On 12/31 after time passes and some of the insurance is used by the company, an AJE is posted AJE 2 Scenario 2: On 11/1 the accounting firm pays $1,200 for supplies. JE: Dr Supplies (curr asset) 1,200 Cr Cash 11/1 record payment made in advance for supplies After time passes and supples are used, an AJE is posted. A physical count of supplies on 12/31 reveals that 5400 af supplies is left Record the AJE on 12/31. AUE 3: Other scenarios: prepaid advertising, prepaid rent, prepaid interest, prepaid subscription