Because we're going to tell the accounting department, hey, you're going to debit cash. And then you're going to credit unearned revenue, not revenue, because has not yet been earned. And then we in the adjusting department will determine how much has been earned. And write that down. So this account is going to be the one that we are using that I'm going to make a green, then there's going to be some accounts down here below the blue line on the income statement related to this adjusting process. And in this case, it will be revenue.

So we're going to adjust unearned revenue and revenue, the amount of the revenue that has now been earned. So we know that the revenue account is an income statement account and they only go one way they go up. And revenue here has a credit balance. So how do we make something go up, we do the same thing to it, which in this case would be another credit. So we're going to credit revenue, I'm going to copy that. I'm going to put it on the bottom, even though I don't know the number yet.

So there's the letter I'm going to put it on the bottom and see nine right click Paste it 123 then if that's the credit, then We're gonna have to debit something. And if the only other account is this one, then that must be the debit. So I'm going to copy that. I'm going to paste it 123 now so we can know which way it's going. If we can determine those accounts without knowing too much more about it than that. Now we're going to discuss a little bit more about it and what numbers should we put in there.

So we have discussed a bit that this account represents that we have unearned revenue as of this time period, meaning we debited cash, we credit unearned revenue, because we had not yet earned the revenue for something such as a concert or something like that, then we're determining that at this point in time 8002 50 is what the unearned revenue should be at this point in time. And we currently have 11,000 in there. So we need to bring this to this amount here. So once again, that's going to be a subtraction problem. So what do we have to bring 11,000 down by to get to 8000 to 50,000 Now that we determined is still uncollectible. So there, we can do that over here.

Once again, we're going to say what's what's in there right now 11,000. And what we have now determined it to be, is 8250. If we subtract that out, then this equals the 11,000 minus the eight to five zero means that this 11,000 needs to go down by 2007 50, in order to get it to eight to five, zero. Now if this is a little confusing to you, you might want to think about it writing it down algebraically on a piece of paper, sometimes writing it down can be very useful. So if you just wrote down on a piece of paper, what we're what we're doing here is we're trying to say this 11,000 minus x minus what we'll bring it to equals 8250. And then you can do the algebra on it.

But notice, it's either going to be an addition or subtraction problem for the most part because we're dealing with addition and subtraction problems here. It's going to be a subtraction prompt to find the difference in this case, and then we can post it and see if it does what we think it should do, what do we think it should do? It should bring that down to what we determined it to be, which is 8250. So we're going to say that this journal is going to be 2750 for both the debit and the credit, which I'm going to say negative left ones up once and enter, then we're going to post this transaction to the adjusting column here. So I'm going to go to the H 14 right there equals and we're going to point to the 2750. This is a credit, that's a debit, they're the opposite.

Therefore this is going to go down. Did it go down to what we think it should? Yes, it did. It went down to that so that that will be our check right there. If it doesn't, if it goes the wrong way, then maybe we added we should have subtracted in our calculation and we'll just flip it and do it the other way and see what happens. So then we're going to report the other side here.

We're out of balance of course by that 2750. So in Ah 16 we're gonna say that equals and point to the credit, that's a credit, that's your credits gonna make the credits go up, gonna make us back in balance, and it's going to make net income go up. So there we have that. And we are back in balance here. So now it's I'm going to highlight these so we can move on to the next one and repeat the same process with it says the cut off date lands on a Wednesday employees are paid on Friday. Therefore as of the cutoff date, employees worked three days for which they had not yet been paid, represented by the following amount.

So first, let's see if we can just see which accounts will be affected and then we'll break that down. So we're talking about wages in some way salaries or wages. And there's going to be one balance sheet account above the blue line and one below the blue line, which will be an income statement account, what's going to be the balance sheet account up here related to wages or salaries or employees of some kind, and we see wages payable probably looks like a good one to choose. So I'm going to make that got green. And then below the blue line, there's gonna be some accounting related to wages or salary or payroll or something. And we see it's going to be an expense, it's going to be either an income or expense down here, because that's all we got on the income statement.

And it is an expense of wages at this time. And we know that expenses only go one way they go up, the employees don't generally pay us. So how do we make something go up, we do the same thing to it as what it is, this happens to be a debit because it's an expense and all expenses are, so we're going to make it go up by doing the same thing to it, which would be another debit. So I'm going to copy that I'm going to put it on top because debit generally go on top, and then we're gonna have to credit something and we determined that the only other account affected is wages payable, therefore, wages payable must be what the credit is. So I'm going to copy that. I'm going to put that on the bottom, like so.

Now. So once again, we could see which way the accounts are gone just by looking at which accounts will be affected without knowing really what's going on now. Now let's talk about what's going on. So wages payable, we can see is in the liability section with it. liability areas and expenses, obviously an expense. So if an S in a payroll system we pay employees on a Friday, then they're they're working before they get paid clearly in that situation.

So it doesn't make sense for us to be in a perfectly accrual basis, which would mean that we would have to accrue the fact that they worked, even though they didn't get paid every minute or every second or even every every hour. So what we're gonna do is the payroll system will generally be on a cash basis, meaning we record payroll when we pay it, and we record the expense when we pay it. But as of the cutoff date, we want it to be as correct as possible in terms of an accrual basis. So we will make the adjustment for the fraction of a period that has been has been earned but not yet paid. So for example, if we the pay week ends on a Friday, but the cutoff date, the end of the month, the 31st of the month, happens to be on a Wednesday, and there's a five day workweek, well There's been three days then as of our cutoff date, in which that we need to record the payroll that has not yet been recorded so that our financial statements will be right on an accrual basis.

Again, it's not like the bookkeeper did something wrong in this case, or the accounting department, because it would not make sense for them to accrue constantly, perfectly correctly. But it does make sense for us if we're going to make the financial statement as of the cutoff date to make it right as of that date by adjusting for that. So what we're going to say, hey, there's three days that we need to expense as of the cutoff date that aren't going to get paid till next month or next pay period, and that amount amounts to 2500. Now, in this case, there's nothing in wages payable already. So we don't really need to do a calculation on that adjusting entry. We know that we're going to expense 2500 that's the amount that we determined was the expense for the three days that has has not yet been paid.

So we're going to expense to five for the Three days and then we're going to credit wages payable, meaning the wages payable are going to go up because we owe those employees that money for the three days that they work which we will pay them on Friday in the normal payroll process. So if we then post that, then we can go down here to h 17. And say equals and then point to the expense 2005, this is a debit, that's a debit, it's gonna make the debits go up, it's gonna bring net income down. So there we have that now we're out of balance here, we're going to go to the H 13. equals and point to the to five credit there, and that these are credit balance accounts. That's credit it's going to bring the liability up in the credit direction, put it back in balance here.

And so there we have that note the effect on the net income through this adjusting process. Most every adjusting entry will affect the net income for the most part. So