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-   -   Adjusting entries - advertising expense (https://www.askmehelpdesk.com/showthread.php?t=130363)

  • Sep 16, 2007, 09:56 PM
    billytalent
    Adjusting entries - advertising expense
    Hi,
    I have a problem with one journal entry. Here's the situation:

    The company paid 150,000 for misc. operating expenses (in 2006). This is my entry:
    Dr. Misc. Op. Exp. 150,000
    Cr. Cash 150,000

    And now I have to make an adjustment entry. A review of the company's advertising campaign indicated that of the misc. operating expenses made in 2006, $30,000 applies to promotions to be undertaken during 2007. My entry looks like this, but I'm not sure if it's correct:

    Dr. Prepaid Advertising 30,000
    Cr. Cash 30,000
  • Sep 17, 2007, 12:30 AM
    billytalent
    I've been thinking.. maybe credit the expense account, since the cash has already been paid.. I'm confused, and I really need to get this entry correct to finish my assignment (t-accounts, inc. statement, balance sheet etc.).

    I would appreciate any help!
  • Sep 17, 2007, 01:28 AM
    CaptainForest
    Sometimes the best way to think about adjustments is to break the question into 3 parts: what was done, what should have been done and what needs to be done to convert.

    What was done:
    Dr. Misc. Op. Exp. 150,000
    Cr. Cash 150,000

    What should have been done:
    Dr. Misc. Op. Exp. 120,000
    Dr. Prepaid Advertising 30,000
    Cr. Cash 150,000

    What needs to be done to correct the mistake:
    Dr. Prepaid Advertising 30,000
    Cr. Misc. Op. Exp. 30,000
  • Sep 17, 2007, 02:11 AM
    Irfan Akhter
    No pal accordn to me adjusting entry must be


    Dr. Prepaid Advertising 30,000
    Cr. Misc operating exp 30,000

    Because prepaid means expense paid but not yet incurred(so less 30000 frm exp accountanf then in p&l)
    And there is no logic to credit the cash account again by 30000 because you hv already credited the cash account by 150000
  • Sep 17, 2007, 06:04 AM
    billytalent
    Thank you guys!

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