[billytalent]

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

[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!

[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

[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

[billytalent]

Thank you guys!