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Sorry to make another thread and ask this again.
You said at the end of your lecture that if the estimated accrual comes out to be $960 (instead of $950) then the bookkeeper will record the expense by debiting the telephone account but what will be the credit entry (accruals or cash). Please explain why?
Secondly, if the estimated accrual comes out to be lower $940 (instead of $950) then the bookkeeper will need to reduce the expense by crediting the telephone account but what will be the debit entry (accruals or cash). Please explain why?
We record the payment by debiting the expense account with the amount paid (in this case 960). The credit entry is to cash.
That is the entry we always make when we pay an expense (as explained in Chapter 3 of our notes and the lectures working through the chapter), and it is the same entry whether we pay 960 or 940.
The bookkeeper does not need to increase or reduce the expense – it will happen automatically because there is already a brought forward balance of the estimated amount on the account.
I show the entries and explain the logic in the lectures.
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