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Prepare line record

in this video we will see how to prepare adjusting entries to record revenues in the period in which they are earned and to recognize expenses in the period in which they are incurred companies prepare adjusting entries at the end of each accounting period adjusting entries convert a company's accounting records to the accrual basis of accounting their main purpose is to match incomes and expenses to appropriate accounting periods every adjusting entry will involve one income statement account and one balance sheet account an adjusting entry is needed in cases of deferrals and accruals deferrals are further classified into prepaid expenses and unearned revenues prepaid expenses are expenses pay in cash and record as assets before they are used or consumed unearned revenues our revenues received in cash and recorded as liabilities before services are performed accruals are further classified into accrued revenues and accrued expenses accrued revenues our revenues for services performs but not yet received in cash are recorded accrued expenses are expenses incurred but not yet paid in cash or recorded let's look at an illustration to see how to prepare adjusting entries Patrick Urich DDS started his dental practice on January 1st year 1 transactions occurred during the first month of operation are provided we will prepare adjusting entries using the provided accounting titles on January 31st Patrick performed services worth of $1000 for patients with dental insurance for which payment was neither received nor recorded this can be identified as a crude revenue this can be recorded by debian accounts receivable for $1,000 in crediting service revenue for the same amount in the second transaction utilities expenses of $1,500 were incurred but no payment was made until the end of January it is an accrued expense to record this transaction utilities expenses is debited for $1,500 and utilities payable is credited the same amount in a third transaction Patrick purchased dental equipment for $70,000 paying fifteen thousand dollars partly in cash and fifty-five thousand dollars by signing a note the equipment depreciates $450 per month interest is $550 per month in this case the adjusting entry is required to record appreciation on equipment and the interest expense accrued at the end of the period depreciation is the cost that the company allocates to expense the cost of the equipment for the period hence this can be identified as a prepaid expense to record depreciation we debit depreciation expense an expense account for $450 and credit accumulated depreciation equipment a contra asset account for the same amount to record the accrued interest expense we debit interest expense for $550 and credit interest payable for the same amount next on January 1st Patrick purchased a one-year malpractice insurance policy for $12,000 this is a prepaid expense expenses paid in advance are considered as an asset at the time of payment and as the amount expires the asset is reduced and expense is recorded for the amount of the reduction in this case $12,000 is the...