FUNDAMENTALS OF

ACCOUNTING
 ADJUSTING ENTRIES

At the end of the lesson, the learners will be able to:

1.Explain the purpose of adjusting entries;
2.Determine the six types of adjusting entries;
3.Prepare appropriate adjusting entries of a certain
transaction.
 
 ADJUSTING ENTRIES
 
 Adjusting entries are made in the accounting books at the end of an accounting period.
These are made after a trial balance is prepared.
 What is the purpose of adjusting entries?
 The purpose of adjusting entries is to adjust revenues and expenses to the accounting
period in which they actually occurred.
There are six types of adjusting entries
 Accrued revenues
 Unearned revenues
 Accrued expenses
 Prepaid expenses
 Depreciation
 Allowance for uncollectible account
 1. Accrued Revenues
If you performed a service for a customer in one month, but don’t bill the customer
until the next month, you would make an adjusting entry showing the revenue in the
month you performed the service.
The entry is:
Debit Credit
Accounts Receivable 0.00
Service Revenue 0.00
Accrued Revenue
Lipana Tax Consultancy rendered year-end tax compliance and consultancy services to ABC Company on December 15-19,
2020 amounting to P50,000. It was ascertained that ABC Company will be paying Lipana Tax Consultancy during the first
quarter of 2021. Prepare the adjusting entry at December 31, 2020.
 2. Unearned Revenues
Unearned revenues refer to payments for goods to be delivered in the future or services to be performed.
The adjusting entry will depend on the method adapted by the organization in recording the advanced
payment:
 
 Revenue Method
For example, a tenant paid in advance in September 1, 2016 a rental fee good for one year
amounting to P12,000. The entry in September 1, 2016 will be:
Debit Credit
Cash 12,000
Revenue 12,000
At December 31, 2016, an adjusting entry will be set-up for the actual revenue earned (Sept to Dec=
4mos or P4,000) and the remaining unused portion as liability (Jan to Aug= 8mos or P8,000).
The adjusting entry at the end of the year will be:
Debit Credit
Revenue 8,000
Unearned revenue 8,000
 Liability Method
Debit Credit
Cash 12,000
Unearned Revenue 12,000
 
The adjusting entry at the end of the year will be:
Debit Credit
Unearned revenue 4,000
Revenue 4,000
 
Lipana Tax Consultancy received P150,000 representing advanced payment for (6) months tax
compliance and consultancy services from one of their clients on November 1, 2020. The
accounting period of the entity ends on December 31, 2020.
 3. Accrued Expenses
 These are expenses that are already incurred by the business organization but not yet
paid as of reporting date.
 
Example: Weekly wages (Monday to Saturday) are paid every Saturday amounting
to P12,000. If the Saturday is December 28, the 3 days which is December 29, 30
and 31 remain unpaid at the end of the accounting period.
Therefore, the adjusting entry will be:
 
Debit Credit
Salaries and Wages 6,000
Accrued Expense Payable 6,000
 
 4. Prepaid Expenses
Prepaid expense are assets that are paid in advance and gradually get used up during the accounting period.
The adjusting entry will depend on what method the business organization adapts while recording the initial transaction.
 
a. Asset method
For example, the business organization purchased supplies in March 1, 2016 for P24,000. At the end of December
31, 2016, used up portion which will be charged to expense will be equivalent the to 10 months (March 1 to Dec
31, 2016) and the unused portion which will be an asset is 2 months (Jan & Feb, 2017).
 
The entry when the supplies are purchased will be:
Debit Credit
Supplies 24,000
Cash or Accounts payable 24,000
 
The adjusting entry to charge the used up portion to expenses will be:
Debit Credit
Supplies expense 20,000
Supplies 20,000
 
b. Expense Method
The entry when the supplies are purchased will be:
Debit Credit
Supplies expense 24,000
Cash 24,000
 
The adjusting entry at Dec 31, 2016 to set up the asset portion will be:
 
Supplies 4,000
Supplies expense 4,000
 
 5. Depreciation
 Depreciation is the process of allocating the cost of an asset, such as machinery or a piece of equipment, over the
serviceable or economic life of an asset.
 This type of adjusting entry has the following terminologies:
 
a. Cost of the asset- this is the amount recorded when the asset is purchased.
b. Salvaged value- scrap value or residual value, this is the estimated amount of recovery at the end of the
asset’s useful life.
c. Estimated useful life- this is an accountant’s fair estimate of the economic life of the asset.
d. Carrying amount or net book value- this is the difference between the cost of the asset and the
accumulated depreciation.
 
The formula in the computation of depreciation expense is:
Depreciation expense= Cost of the asset-Salvaged value
Estimated Useful Life
 Example: A machinery having a useful life of 5 years is purchased on June 1, 2016. Cost of the asset is
P25,000 whereas its residual value is expected to be P1,000. Calculate depreciation expense for the year
ending December 31, 2016.
P25,000 - P1,000
Depreciation expense = 5 years
= P4,800 per year/12 months
= P400 per month X 7 months
= P2,800
 
Adjusting entry at December 31, 2016:
Debit Credit
Depreciation expense 2,800
Accumulated depreciation 2,800
 
Annual Depreciation coinciding with the calendar year-end
Jimin Company purchased equipment on January 1, 2020 amounting to P500,000 with residual value of
P50,000 and life of five (5) years. Prepare adjusting entries on asset depreciation and fill up the depreciation
table.

Adjusting entry at December 31, 2020:

Debit Credit
Depreciation expense 90,000
Accumulated depreciation
90,000
 6. Allowance for Uncollectible Account
 
 The allowance for doubtful accounts is a reduction of the total amount of accounts receivable appearing on a
company’s balance sheet, and is listed as a deduction below the accounts receivable.
The adjusting entry is:
Debit Credit
Uncollectible account expense 0.00
Allowance for uncollectible account 0.00
 There are two methods of computing this adjusting entry:
 
a. Based on percentage of account sales for goods sold or services rendered.
Example: The total sales is P100,000 and P25,000 represents cash sales. The balance of accounts receivable is
P30,000. About 5% is proven uncollectible.
Adjusting entry will be:

Debit Credit
Uncollectible account expense 3,750
Allowance for uncollectible account 3,750
 
b. Based on accounts receivable balance

Debit Credit
Uncollectible accounts expense 1,500
Allowance for uncollectible account 1,500
 PREPARING AN ADJUSTED TRIAL BALANCE

At the end of the lesson, the learners will be able to:

1. Identify needed information on preparing adjusted trial balance;
2. Prepare an adjusted trial balance.
 PREPARING AN ADJUSTED TRIAL BALANCE
 
On our previous lesson, we already know how to adjust entries on the
books of accounts. And the next step is to prepare the Adjusted Trial
Balance in order for us to incorporate the adjusting entries we made.
This is the second trial balance prepared in the accounting cycle. Its
purpose is to test the equality between debits and credits after adjusting
entries are entered into the books of the company.
To illustrate how it works, here is a sample unadjusted trial balance:
 
 Gray Electronic Repair Services
Unadjusted Trial Balance
December 31, 2019
     
Account Title Debit Credit
Cash P7,480.00  
Accounts Receivable 3,400.00  
Service Supplies 1,500.00  
Furniture and Fixtures 3,000.00  
Service Equipment 16,000.00  
Accounts Payable   9,000.00
Loans Payable   12,000.00
Mr. Grey Capital   13,200.00
Mr. Grey Drawing 7,000.00  
Service Revenue   9,550.00
Rent Expense 1,500.00  
Salaries Expense 3,500.00  
Taxes and Licenses 370.00  
Totals P43,750.00 P43,750.00
At the end of the period, the following adjusting entries were made:

      Debit Credit
Dec. 31 Accounts Receivable 300.00  
    Service Revenue   300.00
  31 Utilities Expense 1,800.00  
    Utilities Payable   1,800.00
  31 Service Supplies Expense 900.00  
    Service Supplies   900.00
  31 Depreciation Expense 720.00  
    Accumulated Depreciation   720.00
After posting the above entries, the values of some of the items in the unadjusted trial balance will change. Take the first
adjusting entry, Accounts Receivable is debited hence is increased by 300.00. Service revenue is credited for 300.00
 
The balance of Accounts Receivable in increased to 3,700.00. You added 3,400.00 from unadjusted balance plus 300.00
adjustment. Service Revenue will now be 9,850.00 from the unadjusted trial balance of 9.550.00.
 
Next entry, Utilities Expense and Utilities Payable did not have any balance in the unadjusted trial balance. After posting the
above entries, they will now in the adjusted trial balance.
 
Third, Service Supplies Expense is debited for 900.00. Service Supplies is credited for 900.00. The Service Supplies account
had a debit balance of 1,500. After incorporating the 900.00 credit adjustment, the balance will now be 600.00 (debit).
 
And fourth, there were no Depreciation Expense and Accumulated Depreciation in the unadjusted trial balance. Because of
the adjusting entry, they will have a balance of 720.00 in the adjusted trial balance.
 
After incorporating the adjustments above, the adjusted trial balance would look like this. Just like in the unadjusted trial,
total debits and total credits should be equal.
 
 Gray Electronic Repair Services
Adjusted Trial Balance
December 31, 2019
     
Account Title Debit Credit
Cash 7,480.00  
Accounts Receivable 3,700.00  
Service Supplies 600.00  
Furniture and Fixtures 3,000.00  
Service Equipment 16,000.00  
Accumulated Deprecation   720.00
Accounts Payable   9,000.00
Utilities Payable   1,800.00
Loans Payable   12,000.00
Mr. Grey Capital   13,200.00
Mr. Grey Drawing 7,000.00  
Service Revenue   9,850.00
Rent Expense 1,500.00  
Salaries Expense 3,500.00  
Taxes and Licenses 370.00  
Utilities Expense 1,800.00  
Service Supplies Expense 900.00  
Depreciation Expense 720.00  
Totals P46,570.00 P46,570.00
 FINANCIAL STATEMENTS

At the end of the lesson, the learners should be able to:

1. Define Financial Statements;

2. Know the different forms of Financial Statements;
3. Appreciate the importance of Statement of Financial Position in knowing assets,
liabilities and capital of a certain business;
4. Prepare a Statement of Financial Position.
5. Prepare a Statement of Income.
 FINANCIAL STATEMENTS
The Financial Statements represent a formal record of the financial activities of performance and liquidity of a company.
Financial Statements reflect the financial business organization. These are written reports that quantify the financial
effects of business transactions and events on the business.

1. Statement of Financial Position

The Statement of Financial Position, also known as the Balance Sheet the financial position of an entity as of a given
date. It is comprised of the following three elements:
 Assets- something a business owns or controls (e.g. cash, inventory, plant machinery, etc.)
 Liabilities- something a business owes to someone (e.g. creditors, bank lenders, and it includes also your payables
etc.)
 Equity or Capital- what the business owes to its owners. This represents amount of capital that remains in the
business after its assets are used to pay off its outstanding liabilities. Equity or capital therefore represents the
difference between the assets and liabilities.
Illustration 1:
The trial balance of San Diego Enterprises was prepared for the period covering January 1 to June 30, 2016. As an
accountant you are required to prepare a Statement of Financial Position. As of June 30, 2016.
SAN DIEGO ENTERPRISES
Trial Balance
June 30, 2016
    Debit Credit
Cash- C/A   150,000.00  
Accounts Receivable- C/A   25,000.00  
Supplies- C/A   10,000.00  
Prepaid Rent- C/A   60,000.00  
Delivery Vehicle-NCA   75,000.00  
Office Equipment- NCA   15,000.00  
Furniture- NCA   10,500.00  
Accumulated Depreciation     15,000.00
Accounts Payable- CL     15,500.00
VAT Payable- CL     5,000.00
Notes Payable- NCL     45,000.00
San Diego, Capital     250,000.00
San Diego, Drawing   20,000.00  
Net Income     35,000.00
Total   365,000.00 365,000.00
 Solution to Illustration 1

SAN DIEGO ENTERPRISES

Statement of Financial Position
As of June 30,2016
   
ASSETS LIABILITIES  
Currrent Assets: Current Liabilities:  
Cash 150,000.00 Accounts Payable 15,500.00
Accounts Receivable 25,000.00 Vat Payable 5,000.00
Supplies 10,000.00 Total Current Liabilities 20,500.00
Prepaid Rent 60,000  
Total Current Assets 245,000.00  
   
Non-current Assets Non-current liabilities:  
Deleivery Vehicle 75,000.00 Notes Payable 45,000.00
Office Equipment 15,000.00  
Furnitures 10,500.00 Total Liabilities 65,500.00
Total Non-current Assets 100,500.00  
Less: Accum. Depreciation 15,000.00 CAPITAL  
Net Book Value 85,500.00 San Diego Capital 265,000.00
   
Total Assets 330,500.00   Total Liabilities & Capital 330,500.00
2. Statement of Income
Statement of Income or Income Statement, also known as the Profit and Loss Statement, reports the company's financial
performance in terms of net profit or loss over a specified period.
 
Income Statement is composed of the following two elements:
 Income- what the business has earned over a period (e.g. sales or service revenue, dividend income, interest income, etc.)
 Expense- the cost incurred by the business over a period (e.g. salaries and wages, depreciation, rental charges, etc.)
- Net profit or loss is arrived at by deducting expenses from income.
 
Illustration 2
Mr. A established his janitorial services business in October, 2016. The business has operated for almost a year now and he
is planning to expand it in other places. For the first quarter of 2017, he wanted to see how the business is earning in profits
and see how he can position his business in strategic locations.
The following is the trial balance lifted from the general ledger of ABC Janitorial Services for the period covered January
1 to June 30, 2017. You are required to prepare a single-step income statement for the period covered ending June 30, 2017.
 
 ABC JANITORIAL SERVICES
Trial Balance
June 30, 2017
       
    Debit Credit
Cash   181,900.00  
Accounts Receivable   20,000.00  
Office Supplies   5,000.00  
Prepaid Rent   45,000.00  
Office Equipment   75,000.00  
Furniture & Fixtures   30,000.00  
Rental Deposit   30,000.00  
Accounts Payable     62,500.00
Mr. A Capital     300,000.00
Mr. A Drawings   10,000.00  
Service Revenue     150,000.00
Interest income     750.00
Gain on sale of assets     1,450.00
Advertising expense   10,000.00  
Light and Water expense   10,300.00  
Salaries, wages & benefits   70,000.00  
Rent Expense   15,000.00  
Representation expenses   3,000.00  
Telephone expenses   7,500.00  
Transportation expenses   2,000.00  
    514,700.00 514,700.00
       
 Solution to Illustration 2
ABC JANITORIAL SERVICES
Statement of Income
For the Quarter Ended June 30, 2017
   
   
Revenues/Income  
Service Income 150,000.00  
Interest Income 750.00  
Gain on sale of assets 1,450.00 152,200.00
Less: Expenses  
Advertising Expense 10,000.00  
Light and Water Expense 10,300.00  
Salaries, wages & benefits 70,000.00  
Rent expenses 15,000.00  
Representation expenses 3,000.00  
Telephone expenses 7,500.00  
Transportation expenses 2,000.00 117,800.00
Net Income for the period 34,400.00
       
 FINANCIAL STATEMENTS (cont.)

At the end of the lesson, the learners should be able to:

1. Define Statement of Cash Flow and determine the elements
involving Cash Flow activities;
2. Prepare Statement of Cash Flow.
 FINANCIAL STATEMENTS (cont.)
Statement of Cash Flow
Statement of Cash Flow of Cash Flow Statement presents the movements in cash and
bank balances over a period. The movement in cash flows is classified into the
following segments:
1. Operating Activities – represents the cash flow from primary activities of a
business.
2. Investing Activities – represents cash flow from the purchase and sale of assets
other than inventories (e.g. purchase of a machinery, etc).
3. Financing Activities – represents cash flow generated or spent on raising and
repaying share capital and debt together with the payments of interest and
dividends.
The method in preparing the cash flow statement:
Direct method - The direct method of presenting the statement of cash flows presents the
specific cash flows associated with items that affect cash flow.
Items that are typically included:
 Cash collected from customers
 Interest and dividends received
 Cash paid to employees
 Cash paid to suppliers
 Interest paid
 Income taxes paid
The following exercises will illustrate formats of the direct methods in preparing the
Statement of Cash Flow of a sole proprietorship business.
 
Illustration 1
The following Statement of Financial Position and Statement of Income of Cleo Salon
were prepared by the accountant covering the period January 1 to June 30, 2016. The
business was established in December 1, 2015 but began its operation January 1, 2016.
During the period, the owner initially invested in January 1 the amount of P165,000 and
subsequently made additional investment in March for P50,000. The owner also made cash
withdrawals amounting to P20,000.
 
 CLEO SALON
Statement of Cash Flow
For the Period Ended June 30, 2016
   
Cash Flow Operating Activities:  
Cash Received from customers 412,100.00
Cash paid for salaries and wages -170,000.00
Cash paid for supplies -39,700.00
Cash paid for rent -80,000.00
Cash paid for light and water -45,000.00
Cash paid for telephone expenses -9,000.00
Cash paid for taxes and licenses -10,400.00
Cash paid for insurance -3,000.00
Net cash flow provided by operating activities: 55,000.00
   
Cash Flow from Investing Activities:  
Cash paid for purchase of office equipment 45,000.00
Cash paid for purchase of furniture 20,000.00
Net cash flow used for investing activities: 65,000.00
   
Cash Flow from Financing Activities:  
Cash investment of owner 165,000.00
Additional cash investment from owner 50,000.00
Cash withdrawal by owner -20,000.00
Net cash flow provided by financing activities 195,000.00
   
Net Increase in Cash 185,000.00
Cash balance, beginning -
Cash balance, end 185,000.00
     
 ACCOUNTING WORKSHEET

At the end of the lesson, the learners will be able to:

1. Define worksheet in an accounting perspective;
2. Know the types of Worksheet that needed by a
business firm;
3. Explain the eight steps in preparing worksheet.
For preparing accounting worksheet you must follow 8 Simple Steps to verify accounting information
accuracy before preparation of financial statements. Prepare financial statements from a worksheet is
relatively easy because all necessary accounting information is properly presented and structured in the
worksheet.
 
What is Worksheet?
A worksheet is a multiple column sheet wherein all necessary information used for the preparation of the
financial statement is recorded in a systematic process is called a worksheet. The worksheet is not a
permanent account. It is not a part of a journal or ledger. It is a device used for easy preparation of adjusting
entries and financial statements. The worksheet is a multi-column sheet or a computer spreadsheet where the
accountant writes, in brief, information necessary for the preparation of adjusting entries and financial
statements.
Basic format of Worksheet
In bigger organizations where the volume of accounts and adjustments are much more, the possibility of
error remains at the time of adjustment of adjusting entries with ledger accounts if the worksheet is not
prepared. The preparation of financial statements correctly becomes complicated and sometimes is
delayed. In the present day world, it has become the practice of preparing worksheets in big
organizations before the preparation of financial statements.
 
Accountants make adjustments of adjusting entries with other relevant ledger accounts before the
preparation of financial statements. Before the preparation of financial statements, the accountants want
to be sure of the arithmetical accuracy of accounts by making adjustments of adjusting entries with
ledger accounts through the worksheet and then go for the preparation of financial statements.
3 Types of Worksheet are;
1. The general worksheet
The general worksheet contains four to six pairs of columns. Generally, five pair columns or ten columns worksheets
can serve the purpose of general business. These five pair columns are;
 Trial balance
 Adjustment
 Adjusted trial balance
 An income statement, and
 Balance sheet.
2. The detailed worksheet
The detailed worksheet is prepared for containing more detailed information over a general worksheet. Sometimes
extra sheet containing columns are enclosed for explaining particular items. The matters for which item-wise lists are
to be prepared are:
 Accounts receivable and accounts payable lists,
 Production expenditure lists,
 Insurance premium lists etc.
3. Audit worksheet
Audit worksheet is used for preparing financial statements and lists for various uses of business concerns. The audit
worksheet is prepared in the light of the auditing of various items included in the worksheet.
It is an aid to audit the work of a business concern. The worksheet is a technique of accounting through which the
accounting information is integrated for adjustment and classification.
The main objective of the worksheet is to verify the accuracy of accounting information before the preparation of
financial statements. For preparing an accounting worksheet one must follow 8 Simple Steps to verify accounting
information accuracy before preparation of financial statements.
8 Steps in Preparing Accounting Worksheet
1. Name of business organization and preparation date
At the beginning of the worksheet the name of the organization for which worksheet is prepared is to be written in the bold
form and also the date of preparation of the worksheet is to be mentioned.
2. Drawing column and mentioning the head of the column
Drawing column titles are to be mentioned here. For example, serial number in the first column, the title of accounts in the
second column and thereafter pair columns.
3. Unadjusted Trial Balance
After the serial number and accounts title columns, in the unadjusted trial balance, pair column ledger accounts balances
are posted straight to check the agreement of trial balance. This trial balance is called pre-closing trial balance as it is
prepared with the ledger balances before keeping accounts of adjustment items.
Debit and credit balances of ledger accounts are written in the debit and credit columns of the trial balance respectively.
4. Adjustment column
At the end of the accounting period, the items or transactions which have not been accounted for are written in the debit
and credit of adjustment columns. At the time of making adjustments, if there does not exist any item in the trial balance
for debiting and crediting, these adjusting items are to be written below the trial balance under appropriate head(s) in debit
and credit columns of adjustment.
To identify the adjusting items separate code numbers for each item be given in debit and credit columns. Thereafter debit
and credit columns of adjustments are totaled for assuring their agreement.
5. Adjusted trial balance column
Writing necessary adjustments in the adjustment column, the balance of every account relating to adjustments is ascertained
and thereafter all ledger account balances including adjusted ledger balances are recorded in the debit and credit columns of
adjusted trial balance. That is, unadjusted balances of trial balance are adjusted as per rules and these are written down in
the column of adjusted trial balance.
Writing all ledger balances – adjusted and unadjusted in adjusted trial balance totals of debit and credit are ascertained to
prove the arithmetical accuracy of the ledger accounts.
6. Income statement column
All periodical expenses and incomes of adjusted trial balance are written in debit and credit column of income statement
respectively. The difference between total income and total expenses of the income statement is called profit or loss. The
profit/loss of income statement is transferred to the balance sheet if the retained earnings statement is not prepared.
7. Retained earnings statement (only applicable to Corporation)
In the case of a joint-stock company, the retained earning column is kept in the worksheet before the balance sheet column.
Here previous year’s profit, loss if any and income, loss of income statement of the worksheet are written in the credit
money column and distribution of items regarding distribution of profit such as, dividend paid, proposed dividend, income
tax paid, creation of fund are shown in the debit money column of retained earnings statement.
The difference between the totals of debit and credit columns is transferred to the balance sheet column of the worksheet.
8. Balance sheet
All assets and liabilities of adjusted trial balance including the balance of income statement, retained earnings statement are
written in the debit and credit columns of the balance sheet of worksheet i.e., assets are written in debit money column and
liabilities, owners’ equity are written in the credit money column. Totals of debit and credit column of the balance sheet are
equal. The number of columns of worksheets and titles of columns depends on the nature and demand of the business
concern.
 PREPARING WORKSHEET
 
In our previous lessons, we learned the following:
 How to prepare trial balance.
 How to compute adjusting entries.
 How to prepare adjusted trial balance.
 How to prepare Statement of Financial Position or Balance Sheet
 How to prepare Statement of Income
How do we prepare worksheet of a business?
In preparing the worksheet, we need the following data:
1. Unadjusted Trial Balance

ABC COMPANY
UNADJUSTED TRIAL BALANCE
MARCH 31. 2014

Debit Credit
Cash 446,000
Accounts Receivable 50,000
ABC Capital 400,000
Service Income 106,000
Rent Expense 10,000  
Total 506,000 506,000
1. Adjusting Entries
The following are the details of the transactions at the end of the period that require
adjustments, as follows:
A. On March 31, 2014, the company received P56,000 cash for the services to be rendered
on April 5, 2014 that was credited to service income account.
B. Received utility bill for P1,500 expected to be paid on the first week of April 2014.
C. Salaries for the month of March 2014 has been accrued and will be paid on April 2,
2014, P12,000.
 The adjusting entries at the end of March 2014, are the following:

Date Account Titles & Particulars Debit Credit

       
2014      
March 31 Service Income 56,000  
  Unearned Service Income   56,000
To adjust service income to unearned
  portion    
       
31 Utilities Expense 1,500  
  Accrued Utilities   1,500
  To record accrued utilities    
       
31 Salaries Expense 12,000  
  Accrued Salaries   12,000
  To record accrued salaries    
 Preparing Worksheet for ABC Company 
ABC COMPANY
WORKSHEET
For the month ended March 31, 2014

  Unadjusted Trial Balance Adjustments Adjusted Trial Balance Income Statement Balance Sheet
Account Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit
                     
Cash 446,000       446,000       446,000  

Accounts Receivable 50,000       50,000       50,000  

Capital   400,000       400,000       400,000
Service Income   106,000 56,000     50,000   50,000    
Rent Expense 10,000       10,000   10,000      
Total 506,000 506,000                
                     
Unearned Service
Income       56,000   56,000       56,000
Utilities Expense     1,500   1,500         1,500
Accrued Utilities       1,500   1,500 1,500      
Salaries Expense     12,000   12,000          
Accrued Salaries           12,000 12,000     12,000
Total     69,500 69,500 519,500 519,500 23,500 50,000 496,000 469,500
Net Income             26,500     26,500
Total             50,000 50,000 496,000 496,000