ADJUSTING ENTRIES

USING LIABILITY METHOD AND EXPENSE METHOD

1.Entity X uses the liability method of initial recording of advance collections of items of income. During the year, Entity X receives P100,000 advance collections. The unearned income account has beginning and ending balances of P40,000 and P30,000 respectively.

2.At the beginning of the year, Entity A has a balance of P20,000 in its prepaid asset account. Entity A uses the expense method of recording prepayments. During the year, Entity A made total prepayments of P80,000. The adjusted expenses during the year under the accrual basis accounting is P45,000.