Ajusting entries

Adjusting Entries

Adjusting entries are account entries fabricated at the end of the accounting aeon to admeasure acquirement and costs to the aeon in which they in fact are applicable. Adjusting entries are appropriate because accustomed account entries are based on absolute transactions, and the date on which these affairs action may not be the date appropriate to accomplish the analogous assumption of accretion accounting.

Types of Adjusting Entries:

The two above types of adjusting entries are:

· Accruals: for revenues and costs that are akin to dates afore the transaction has been recorded.

· Deferrals: for revenues and costs that are akin to dates afterwards the transaction has been recorded.

1. Accruals:

Accrued items are those for which the close has been acumen acquirement or amount after yet celebratory an absolute transaction that would aftereffect in a account entry

· Example:

Some accrued items for which adjusting entries may be fabricated include:

· Salaries Payable

· Interest Payable

· Income Tax Payable

· Unbilled Revenue

· Account Entry:

Salaries Expense……………….. Dr.

Salaries Payable………………… Cr.

2. Deferrals

Deferred items are those for which the close has recorded the transaction as a account entry, but has not yet accomplished the acquirement or amount associated with that account entry.:

· Examples:

Some deferred items for which adjusting entries would be fabricated include:

Prepaid insurance

Prepaid rent

Office supplies

Depreciation

Unearned revenue

· Account Entry:

Prepaid Insurance………………. Dr.

Insurance Expense………………. Cr.