The local chapter of Helping Hands, a social serviceorganization, had the follow

Question

The local chapter of Helping Hands, a social serviceorganization, had the following economic events occur during themonth of May:

1. A luncheon honoring volunteers was held at a cost of950. By month end the bill hadn’t been received orpaid.

2. New letterhead and envelopes were printed at a cost of625 and paid for. The new items will not be used, however,until the old supply is exhausted sometime in June.

3. The executive director was paid her usual salary of3,800 during May.

4. Prizes, ribbons, and awards for events upcoming in Julywere delivered by the supplier, who charged 10,175. The amountwas paid in cash.

5. The electric bill for April totaled 163 and was paid infull.

6. Radio, TV, and newspaper advertising related to aspecial fund-raising campaign ran during May. The 7,550 costhad been paid in April.

Helping Hands uses an accrual basis accounting. For whichof the events above should an expense be recorded in May? Ineach case, how much expense should be recorded? If an eventdoes not involve an expense, specify why not.

Explanation / Answer

Hey Lucky Star, This is a problem on matching " Expense " withthe   "revenue " of that period . The rule of thumb is " Make a Journal Entry " . If the entry involves an "expense" account , recordthe expense in May , otherwise "Don't ". Journal Entry 1 No Journal Entry . The Journal entry will be made Expense will be recorded when when the bill has been received. the bill is received. 2 PrepaidStationary                              625 Expense related to June Record the Expense in June.      Cash                                                                625 3 SalaryExpense                                  3800 Expense related to May Record the Expense in May.        Cash                                                              3800 4 PrepaidSupplies                                10,175 Expense related to July Record the Expense in July .                  Cash                                                    10,175 Expense related to April Record the Expense in April. 5 Electricity Expenseoutstanding             163         Cash                                                                163 6 AdvertisementExpense                         7550 Expense related to May Record the Expense in May.       PrepaidAdvertisement                                             7550

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