Reference no: EM132986220

Question - It is the end of the month for Moving Quick, and Pav the owner is excited to see how the business is doing. Using the information provided below, record the adjusting entries to prepare Pav's business financial statements for the month ending 31 July 2021.

1. The company is to pay for the electricity usage for half of the month of July but will not receive a bill until mid-September. Pav estimates the bill, which will cover a 2-month period, will be approximately $360.

2. Depreciation on moving trucks is $250 for July.

3. Interest to be charged for the bank loan for July is $74.

4. The commencement date for the annual business insurance premium is 1 July. The business paid $1,500.

5. Shop rent of $2,100 has been paid on 1 July for the period up to the end of August.

Required -

a) Journalise the required adjusting entries for the month of July. Include narrations.

b) Explain to Pav the necessity of making adjusting entries and what would have been the effect on profit if these adjusting entries had not been made.