ADJUSTING ENTRIES:-
INTRODUCTION:-
à An adjusting journal entry is created to adjust account balances. Adjusting entries are used for a variety of reasons, including booking depreciation or amortization, reallocating accruals and reversing accruals of prepaid income or expenses, adjusting Sales Tax Payable for interest, penalties, or discounts, and entering bank or credit card fees or interest. This is usually done by an accountant.
à An adjusting entry will not affect your books or reports differently from a normal journal entry, except for being noted on the Adjusted Trial Balance report. If you are not sure whether the entry you are about to make should be an adjusting entry, please consult your accountant…
IN OTHER WORDS à Adjusting entries are those entries that passed to rectify an error or wrong entry already made some accounting soft wares have disabled edit function in the accounts, so the only way to undo the mistake is to pass a correction entry or adjusting entry…
TYPES OF ADJUSTING ENTRIES:-
There are total five types of adjusting entries which are as follows:-
1. Accrued revenues
2. Unearned revenues
3. Accrued expenses
4. Prepaid expenses
5. Others…
The detail is given below…
1. Accrued revenues are those which are already earned but not yet paid or recorded . They are also called accrued assets they are normally used in adjusting entries.
2. Unearned revenues are those which are received in cash and recorded as liabilities in the accounts . They are also known as deffered revenues .
3. Accrued expenses are those which have been incurred but not yet paid or recorded . They are also known as accrued liabilities . they are also normally used in adjusting entries .
4. Prepaid expenses are those whish are paid in cash and are recorded but yet to be used .
5. Others includes depreciation of fixed assets, allowances for bad debts, and inventory adjustments .
Problem 4.6(b):-
1.
INTRODUCTION:-
à An adjusting journal entry is created to adjust account balances. Adjusting entries are used for a variety of reasons, including booking depreciation or amortization, reallocating accruals and reversing accruals of prepaid income or expenses, adjusting Sales Tax Payable for interest, penalties, or discounts, and entering bank or credit card fees or interest. This is usually done by an accountant.
à An adjusting entry will not affect your books or reports differently from a normal journal entry, except for being noted on the Adjusted Trial Balance report. If you are not sure whether the entry you are about to make should be an adjusting entry, please consult your accountant…
IN OTHER WORDS à Adjusting entries are those entries that passed to rectify an error or wrong entry already made some accounting soft wares have disabled edit function in the accounts, so the only way to undo the mistake is to pass a correction entry or adjusting entry…
TYPES OF ADJUSTING ENTRIES:-
There are total five types of adjusting entries which are as follows:-
1. Accrued revenues
2. Unearned revenues
3. Accrued expenses
4. Prepaid expenses
5. Others…
The detail is given below…
1. Accrued revenues are those which are already earned but not yet paid or recorded . They are also called accrued assets they are normally used in adjusting entries.
2. Unearned revenues are those which are received in cash and recorded as liabilities in the accounts . They are also known as deffered revenues .
3. Accrued expenses are those which have been incurred but not yet paid or recorded . They are also known as accrued liabilities . they are also normally used in adjusting entries .
4. Prepaid expenses are those whish are paid in cash and are recorded but yet to be used .
5. Others includes depreciation of fixed assets, allowances for bad debts, and inventory adjustments .
Problem 4.6(b):-
1.
| Adjusting Entry | Debits | Credits |
| Unearned dues | 21000 | |
| Earned dues | 21000 |
2.
| Adjusting Entry | Debits | Credits |
| Insurance expired | 3200 | |
| Unexpired insurance | 3200 |
3.
| Adjusting Entry | Debits | Credits |
| Rent expense | 7300 | |
| Prepaid expense | 7300 |
4.
| Adjusting Entry | Debits | Credits |
| Office supplies expense | 1720 | |
| Office supplies | 1720 |
5.
| Adjusting Entry | Debits | Credits |
| Depreciation equipment | 3000 | |
| Accumulated depreciation | 3000 |
6.
| Adjusting Entry | Debits | Credits |
| Interest expense | 750 | |
| Interest payable | 750 |
7.
| Adjusting Entry | Debits | Credits |
| Salaries expense | 10500 | |
| Prepaid salaries | 10500 |
8.
| Adjusting Entry | Debits | Credits |
| Tax expense | 2000 | |
| Tax payable | 2000 |
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