Adjusting Entries

Type ofAdjustment

OriginalEntry

AdjustingEntry

Account Balances Before Adjustment

Balance Sheet

Income Statement

Deferrals:Prepaid Expenses: Asset Method

Expense Method

Prepaid Expense (A) Cash/Accounts Payable

Expense Cash/Accounts Payable

Expense Prepaid Expense (A)

Prepaid Expense (A) Expense

AssetsOverstated

AssetsUnderstated

Expenses Understated

ExpensesOverstated

Pre – collected Income: Liability Method

Income Method

Cash/Accounts Receivable Unearned Revenue (L)

Cash/Account Receivable Revenue/Income

Unearned Revenue (L) Revenue/Income

Revenue/Income Unearned Revenue (L)

LiabilitiesOverstated

LiabilitiesUnderstated

IncomeUnderstated

IncomeOverstated

Accruals:

Accrued Expenses

Accrued Income

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Expense Accounts Payable (L)

Accounts Receivable (A)

Revenue/Income

LiabilitiesUnderstated

AssetsUnderstated

ExpensesUnderstated

IncomeUnderstated