1. Adjusting Journal Entries
| Account Titles & Explanation | Debit (£) | Credit (£) |
|---|---|---|
| Accounts Receivable (To record earned revenue not yet billed) |
4,000 | - |
| Consulting Revenue | - | 4,000 |
| Insurance Expense (To record prepaid insurance expired) |
2,500 | - |
| Prepaid Insurance | - | 2,500 |
| Depreciation Expense — Equipment | 6,000 | - |
| Accumulated Depreciation — Equipment | - | 6,000 |
2. Key Accounting Principle
The Matching Principle dictates that expenses incurred to generate revenue must be recognized in the identical financial period regardless of cash settlement timing.