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What is adjusting entry?

Help with adjusting journal entry accounting?

  • I understand most adjusting journal entries but i cant get this one: ex: july 1st - XX paid 6000 to YY for 6 months rent beginning july 1st. Rent expense was debited for the full amount. What is the adjusting entry to be made July 31st? the answer for the question is: Prepaid rent 5000 DR Rent expense 5000 CR i dont understand questions like this because in my understanding isnt Prepaid Rent supposed to be debited for 6000 not rent expense? and for the adjusting journal entry on july 31st i would have done: rent expense DR 1000 prepaid rent CR 1000 i dont really get how to do it the way they do it in the problem can someone help me please

  • Answer:

    Your thinking is correct that the original entry should have gone to prepaid, with the entry at July 31st expending that 1 month's rent. What the question is stating is that the full $6k was booked to expense in error on July 1st, so what is the adjustment needed to correct it as of July 31st. Since one month of rent ($1k) was realized in July, only the remaining $5k needs to be reclassed as prepaid for July 31st.

Anthony D at Yahoo! Answers Visit the source

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Other answers

You're right. The original entry should have been Debit Prepaid Rent, not Rent Expense. Then the adjusting entry would have been as you noted. But it was not. Instead the Debit was to Rent Expense, so the adjusting entry corrects that. At the end of the month, the balance in Prepaid Rent and Rent Expense are correct.

Don G

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