Answer to Question #113123 in Accounting for Dumisane Stephen

Question

On 1 August 2016 Sipho started a garden services business. The following is an extract of certain
accounts from his trial balance on 31 August 2016:
Prepaid expenses (insurance) R1500
Equipment R8000
Loan (credit) R10000
Fees earned R2000
Income received in advance (fees) R1500
The following relates to the above accounts:
a. The insurance premium was paid for the month of September 2016.
b. Depreciation on equipment for August 2016 amounts to R300.
c. The loan was negotiated on 1 August 2016 at an interest rate of 15% per annum.
d. A client paid R1500 on 1 August 2016, for the next four months (September, October,
November and December).
e. A client, who received services valued at R250 during August, has not yet paid for them.
Sipho would like to prepare statements on a monthly basis.
REQUIRED:
Prepare the adjusting general journal entries as at 31 August 2016. Show all calculations.

Answer 1

a. Debit settlement with different debtors and creditors Credit current account - 1500

b. Depreciation accrued:

Debit primary production credit depreciation of major assets - 300

c.Debit current account lcredit Settlements on short-term loans and borrowings - 10 000

d.Debit settlement account Credit settlements with buyers and customers - 1500

e. Debit settlements with buyers and customers credit sale-250