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Adjusting Entries for Closing Stock and Prepaid Insurance in Financial Accounting

This entry details the adjustment process for closing stock and prepaid insurance as part of the financial accounting cycle. The closing stock is recorded at £6,210, impacting the profit and loss statement. Additionally, an entry for prepaid insurance is made to adjust for a £60 prepaid policy, affecting cash and insurance accounts. Both adjustments ensure the accuracy of the trial balance and provide a clearer financial picture for Family Health Care following its patient fee earnings of RM5,500 during the month.

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Adjusting Entries for Closing Stock and Prepaid Insurance in Financial Accounting

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  1. i Closing stock £6,210 •  Adjusting entry: • Dt. Closing stock £ £6,210 • Cr. Profit and loss account £6,210 Closing stock Profit and loss P&L£6,210 Closing stock £6,210 b/f £6,210 b/f £6,210 £6,210 £6,210 £6,210 £6,210 DebitCredit P&L Trial balance - £6,250 To equate Cost of good sold Closing Stock £6,250

  2. ii £60 of insurance is prepaid  Adjusting entry: Dt Prepaid Insurance xx Cr Insurance xx Insurance Prepaid Insurance Cash/Bank £860 Prepaid Ins £60 Insurance £60 b/f £60 b/f £800 £60 £860 £860 £60 DebitCredit Insurance£860 Trial balance £60 New Balance Prepaid Insurance - £60 = £800

  3. e. During the first month Family Health Care earns patient fees of RM5,500 in cash. Assets = liability + Owner equity Cash Land Equipt. = Note + Capital earning Payable stock Bal. 9,000 12,000 5,000 = 20,000 6,000 e. 5,500 5,500 fees Bal. 14,500 12,000 5,000 = 20,000 6,000 5,500

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