00:01
In this example, we're going to practice doing adjusting entries.
00:04
M &r company provided 2 ,000 of services to customers.
00:09
Those customers are expected to pay us sometime next year.
00:14
If we perform the service, we can credit service revenue because we've earned it.
00:22
So the adjusting entry would involve a credit there.
00:25
We can't credit cash because we haven't received it.
00:28
When we're rating to receive money from a customer, we debit accounts receivable.
00:37
Wages expense of 1 ,000 have been incurred but are not paid.
00:44
We would increase our expenses with a debit, but since we haven't paid it, we don't credit cash.
00:52
We credit wages payable because liabilities are increased with credits in journal entries.
01:03
Lastly, it says that we have a loan that has incurred but not recorded interest expense of 400, and we'll pay that expense next year.
01:17
If we've incurred the expense, we do have to record it.
01:22
We have interest expense for 400.
01:25
If we paid it with cash, we would have credited cash.
01:29
But we didn't, so we owe it.
01:32
We increase the amount of money...