Hi:
I am unsure of how to adjust Advance Sales. For Year End, DEC 31, 2011.
If my Unadjusted Balance for advance sales is $324,000 and I am told the following:
75% of the balance in Advance Sales is for garments to be made and delivered in 2012; the remaining 25% is from sales earned in 2011.
How I would I adjust?
Would I go ...
324,000 *0.25 = 81,000 and say
DR. Unearned advance sales 81000
CR. Earned advance sales 81000
Is it part of my sales account? My sales account has a balance of 1,849,000
To adjust the Advance Sales for Year End (Dec 31, 2011), you need to allocate the amount between unearned advance sales and earned advance sales based on the information given.
First, calculate the amount of earned advance sales for 2011:
Unadjusted balance for advance sales * 25% = $324,000 * 0.25 = $81,000
Then, you can make the following adjustment in your accounting records:
Debit: Unearned Advance Sales $81,000
Credit: Earned Advance Sales $81,000
This adjustment will decrease the Unearned Advance Sales account by $81,000 and increase the Earned Advance Sales account by the same amount.
Regarding your question about whether it is part of the sales account: No, the advance sales are recorded separately from the regular sales in the sales account. The advance sales represent revenue that has been received in advance but has not yet been earned. Once the revenue is earned, it is transferred from the Unearned Advance Sales account to the Earned Advance Sales account. Regular sales, on the other hand, represent revenue that has been earned at the time of sale.
Therefore, your sales account balance of $1,849,000 would not be affected by the adjustment for advance sales.