Example of adjusting entries, Accounting Basics

Q. Example of adjusting entries?

Regulate entries bring the amounts in the general ledger accounts to their proper balances before the company prepares its financial statements. That is adjusting entries change the amounts that are actually in the general ledger accounts to the amounts that should be in the general ledger accounts for proper financial reporting. To make this renovation the accountants analyze the accounts to determine which need adjustment. For instance assume a company purchased a three-year insurance policy costing USD 600 at the beginning of the year and debited USD 600 to Prepaid Insurance. At year-end the company must remove USD 200 of the cost from the asset and record it as an expense. Letdown to do so misstates assets and net income on the financial statements.

2004_Two classes and four types of adjusting entries.png

Companies endlessly receive benefits from many assets such as prepaid expenses (example prepaid insurance and prepaid rent). Therefore an entry could be made daily to record the expense incurred. Usually firms do not make the entry until financial statements are to be prepared. Consequently if monthly financial statements are prepared monthly adjusting entries are required. By norm and in some instances by law businesses reports to their owners at least annually. Therefore adjusting entries are required at least once a year. keep in mind but that the entry transferring an amount from an asset account to an expense account should transfer only the asset cost that has expired.

Posted Date: 7/2/2013 1:57:15 AM | Location : United States







Related Discussions:- Example of adjusting entries, Assignment Help, Ask Question on Example of adjusting entries, Get Answer, Expert's Help, Example of adjusting entries Discussions

Write discussion on Example of adjusting entries
Your posts are moderated
Related Questions
current and non current liabilties

Acquired a shop on monthly rent for Rs. 3,000 after paying cash Rs. 36,000 as advance rent ??

Cash  Flow Analysis:   As per the Institute of Cost and Works Accountants of India (AICWAI), a Cash Flow Statement is a declaration setting out the flow of cash under different

An asset or account of borrower, which has been classified by a bank or financial institution as sub-standard, doubtful or loss assets as per the guidelines issued by RBI. An

Oil production has been proposed for an area along the coast off Southern California. Oil production would jeopardize the use of beaches along 10 miles of coast which are a major v

Q. Explain about stable dollar assumption? In the United States accountants make one more assumption regarding money measurement that the stable dollar assumption. Under the st

Q. Example of work sheet for a merchandising company? Lyons Company is a tiny sporting goods firm. The illustration for Lyons Company focuses on merchandise-related accounts. T

Define the term- FICA TAX   This is a matching tax paid equally by employee and employer. Two parts-OASDI and HIP. Current rate for OASDI is 6.2% on the first $102,000 earned

The conventions and rules of accounting are commonly termed as the conceptual framework of accounting. Along with any discipline or body of knowledge, several underlying theoretica

Q. Explain cash basis of accounting? Professionals such as lawyers and physicians and some relatively small businesses may account for their revenues and expenses on a cash bas