| Course | ACC-6040 Fundamentals of Accounting I |
|---|---|
| Module | Module 3 |
| Paper type | Written Assignment 3: adjusting entries, closing entries, notes and communicating results |
| Length | About 762 words, 5 pages |
| Format | APA 7 student paper |
| School | Thomas Edison State University |
| Program | Master of Science in Accounting |
| Updated | October 2026 |
Free sample paper for ACC 6040 Module 3
Six Entries That Deepen a Loss: Adjusting and Closing Garden State Ice Rinks' January Books
Student Name
Master of Science in Accounting, Thomas Edison State University
ACC-6040: Fundamentals of Accounting I
Mentor Name
Month Day, Year
Six Entries That Deepen a Loss: Adjusting and Closing Garden State Ice Rinks' January Books
Introduction
Transactions recorded during a period do not capture everything that happened. Some resources are used up gradually, some revenue is earned over time and some costs build up without an invoice. At each month end, adjustments catch up the revenue earned and costs used that no transaction has yet recorded, which is what accrual reporting demands (Libby et al., 2017).
The January Adjustments
Each adjustment affects one balance sheet account and one income statement account and never involves cash. The deferral adjustments move amounts already recorded from the balance sheet to the income statement as they are earned or used; the accrual adjustments record revenues and expenses that built up before any transaction was recorded.
| Adjustment | Type | Entry | Effect on income |
|---|---|---|---|
| One-fourth of the league's $48,000 ice time delivered | Deferred revenue | Dr Unearned Revenue 12,000; Cr Service Revenue 12,000 | +12,000 |
| One month of the $306,000 Parsippany lease used: $306,000 / 24 | Prepaid expense | Dr Rent Expense 12,750; Cr Prepaid Rent 12,750 | (12,750) |
| Depreciation: Morristown equipment $120,000 a year / 12, plus Parsippany chillers $85,000 a year / 12 | Depreciation | Dr Depreciation Expense 17,083; Cr Accumulated Depreciation 17,083 | (17,083) |
| Concession supplies: $9,000 bought, $2,500 counted on hand | Supplies used | Dr Supplies Expense 6,500; Cr Supplies 6,500 | (6,500) |
| Interest on the $900,000 bank note at 6% for one month | Accrued expense | Dr Interest Expense 4,500; Cr Interest Payable 4,500 | (4,500) |
| Ice time revenue for January birthday parties not yet billed, $3,000 | Accrued revenue | Dr Accounts Receivable 3,000; Cr Service Revenue 3,000 | +3,000 |
The Adjusted Income Statement
The adjustments did not produce a profit after all: they added $15,000 of revenue but $40,833 of expenses, turning a small unadjusted loss into a larger adjusted loss of $27,133 before taxes. January is a slow month for public skating after the holidays, and the new Parsippany lease and equipment add costs before that rink opens in March. No income tax is accrued for a monthly loss expected to reverse within the year; the annual estimate handles it.
The point of adjusting entries is to report what happened, and here they reveal that January's growing cash balance masked a loss.
Investors and lenders rely on adjusted figures because unadjusted statements depend on when cash happened to move; two rinks with identical business could report very different January results simply because one billed its leagues earlier.
| Income statement, January 2027 | Amount |
|---|---|
| Service revenue: $44,500 + $12,000 + $3,000 | $59,500 |
| Concession revenue | 13,000 |
| Total revenues | 72,500 |
| Wages | 39,000 |
| Utilities | 17,000 |
| Depreciation | 17,083 |
| Rent | 12,750 |
| Supplies | 6,500 |
| Interest | 4,500 |
| Repairs | 2,800 |
| Total expenses | 99,633 |
| Net loss for January | ($27,133) |
Closing the Month
At year end, and in this exercise at month end, temporary accounts are closed to retained earnings so that the next period begins at zero. Revenues of $72,500 are debited and expenses of $99,633 credited, with the $27,133 difference debited to retained earnings; any dividends declared would also be closed to retained earnings. Balance sheet accounts are permanent and carry forward. A post-closing trial balance confirms that only permanent accounts remain.
After closing, the post-closing trial balance lists only balance sheet accounts, and retained earnings equals its beginning balance less the month's loss and any dividends. Many companies prepare adjustments from a standing checklist each month, covering prepaid rent, depreciation, accrued interest, accrued wages and unbilled services, so that none is forgotten when the books are busy.
Notes and Communicating Results
The statements alone cannot tell the whole story, so the notes disclose accounting policies, such as how Garden State recognizes league revenue over the season and depreciates its equipment, along with details of debt terms, lease commitments for the Parsippany rink and any contingencies. Public companies also communicate through earnings press releases, which usually come first, followed by quarterly reports on Form 10-Q, annual reports on Form 10-K with audited statements and current reports on Form 8-K for significant events. Research shows investors respond to these releases: Ball and Brown (1968) found that share prices moved in the direction of earnings news, much of the movement occurring before the annual report itself appeared, as information reached the market through earlier channels.
Managers also use the adjusted figures internally: comparing January's adjusted loss with the budget shows whether the shortfall came from fewer bookings or from higher costs, a question the unadjusted cash figures could not answer. Dechow (1994) showed that accrual earnings track stock returns better than cash flows over short periods, which is the case for making these adjustments at all.
References
Ball, R., & Brown, P. (1968). An empirical evaluation of accounting income numbers. Journal of Accounting Research, 6(2), 159-178. https://doi.org/10.2307/2490232
Dechow, P. M. (1994). Accounting earnings and cash flows as measures of firm performance: The role of accounting accruals. Journal of Accounting and Economics, 18(1), 3-42. https://doi.org/10.1016/0165-4101(94)90016-7
Libby, R., Libby, P. A., & Hodge, F. (2017). Financial accounting (9th ed.). McGraw-Hill Education.
Reading the ACC 6040 Module 3 assignment instructions
Written Assignment 3 covers Module 3: adjusting entries, closing entries, notes and disclosures, and communicating results. The ACC-6040 syllabus weights it together with Written Assignment 1 at 15 percent of the grade. Expect to prepare deferral and accrual adjustments, an adjusted trial balance and statements, the entries that zero out temporary accounts with a final check of the remaining balances, and to explain what notes disclose and how companies report results through press releases and SEC filings. The examples here are fictional; they continue the invented rink's January from Module 2, so the unadjusted balances carry forward. Expect deferrals and accruals in roughly equal numbers. Some versions add a correcting entry.
Inside the ACC 6040 Module 3 example
The introduction explains why adjustments are needed. A table presents six adjustments with their type, entry and effect on income, followed by an explanation of deferrals and accruals. The adjusted income statement is built from the unadjusted figures and the adjustments, and the paper explains the result honestly, including that it reversed the title's expectation, and why taxes are not accrued for the month. A short section explains closing and the post-closing trial balance. The final section covers notes, earnings releases and filings, with research on how quickly earnings news reaches prices. The closing table shows the loss before and after adjustments, so the effect of accrual accounting on reported results is visible in a single comparison.
ACC 6040 Module 3 rubric: what earns full marks
Adjusting entries form the second half of the 15 percent pair begun in Module 1. On this assignment, mentors check that each adjustment is classified and computed correctly, that adjusting entries affect one balance sheet and one income statement account without cash, that the adjusted statements reflect all adjustments, that closing entries leave temporary accounts at zero and that disclosures and filings are described accurately. Showing how each adjustment changes income earns credit for understanding, and accurate computation of prorated amounts avoids the most common deductions. Each adjusting entry should name the account pair and the reason, since the reason shows understanding of the matching principle. A trial balance before and after adjustments shows the effect of each entry on the totals.
ACC 6040 Module 3 help: mistakes that cost marks
The most frequent mistakes are prorating for the wrong number of months, adjusting cash, and forgetting accrued revenue. Write the calculation beside each adjustment, such as $306,000 / 24 months, and confirm that no entry touches cash. After adjusting, recompute net income before closing. Close revenues, expenses and dividends, never assets or liabilities. Be ready to explain why the adjusted result differs from the cash picture. Ask for every account whether time has passed or a service has been delivered since it was last recorded; that one question finds most adjustments. A free first sample of your own ACC-6040 Module 3 problems is available on request.
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ACC 6040 Module 3 questions, answered
Where can I find a free ACC 6040 Module 3 sample paper?
The rink's January adjustments are worked above: six deferral and accrual entries, the adjusted income statement, closing entries and how notes and filings communicate results.
Do adjusting entries ever involve cash?
No. Adjusting entries update a balance sheet account and an income statement account without any cash movement.
What is the difference between a deferral and an accrual?
A deferral adjusts an amount already recorded, such as prepaid rent or unearned revenue; an accrual records a revenue or expense that built up before any transaction was recorded.
Which accounts are closed at the end of a period?
Revenues, expenses and dividends, which are temporary accounts; balance sheet accounts carry forward.
How do public companies communicate results?
Through earnings releases, quarterly 10-Q reports, annual 10-K reports with audited statements and 8-K reports for significant events.