If trial balance shows fiscal year ending 8/31/10 Rent is paid on Jan 1 of every year
Prepaid Rent $0 Cash $ 20,000 rent expense: 45,000
Make adjusting entry for: Rent expense


Rent expense $ 30,000 (Debit)
Cash $30,000 (credit)


If prepaid rent on trial balance is $0 then I can't make an adjusting entry for this? Or can I?

Is the amount credited the used portion or unused amount?

You have to move the portion of the rent that is not used from rent expense to prepaid rent. So the portion of rent not used is from Sep 1 to Dec 31, or 4 months. Now take the $45,000 times 4/12 to get $15,000 of rent not used(or still available to use).

Now your adjusting entry will be:
Debit Prepaid Rent for $15,000
Credit Rent Expense for $15,000

The affect is that you moved the portion of rent paid in advance(4 months of rent) from rent expense that was not used into the prepaid rent account. Also the 8 months of rent that was used is still in the rent expense account.

Great thank you. I understand it now!

For trial balance, accumulated depreciation on equipment is $ 50,000


Depreciation on equipment is $ 5,000
Would my adjusting entry look like:

Depreciation expense $5,000 (debit)
Accumulated depreciation expense- on equipment $ 5,000 (Credit)

Your credit will be: Accumulated Depreciation - Equipment (this is a contra asset account).

Adjusting entries always affect one Income Statement account and one Balance Sheet account.