HomeProductsAccountingAdjusting Entries : A simple introduction and Examples

Adjusting Entries : A simple introduction and Examples

Accounting cycle

Accounting is a process of recording business transactions and financial reporting. The process reflects a continuous and uninterrupted cycle. Accounting has a cycle related to the activities of recording business transactions and financial reporting.

Definition of Adjusting Journal Entries

Of course, for those of you who enter the world of Accounting, getting to know adjusting journals is nothing new. Before we move to the examples section, it might be useful to know what an adjustment log is.

Adjusting journals record changes in balances in a particular account that can ultimately show the actual balance.

Also Read : Adjusting Journal Entries: Why is Adjusting Entries Necessary?

Adjusting Journal Entries Function

Discussing the meaning alone is not enough. You should also understand some of the features of the adjustment entries to better understand this material, such as the calculation of actual nominal estimates (revenues and expenses) for the related period.

Purpose of Adjusting Journal Entries

The purpose of adjusting entries is to convert cash transactions into the accrual accounting method.

Type of Transaction Adjusting Journal Entries

Types of Adjusting Journal Transactions:

Equipment

Equipment in the adjusting journal is goods owned by the company, which are consumable or can be used repeatedly and are relatively small in shape which generally aims to complement the company’s business needs.

Revenue Receivables

Receivables allow buyers to obtain the company’s products by way of debt.

Expense debt

Accrued expenses or also known as expenses payable are expenses that have been incurred but have not been paid until the end of the period and have not been recorded in the relevant account.

Prepaid income

Unearned Income is income that has been received in the State Treasury, but has not become the government’s right because there is still an obligation for the government to provide goods/services in the future as a consequence of receiving income in the State Treasury.

Expenses paid in advance

Prepaid expenses are costs that are not yet an obligation of the company to pay for the period concerned, but have been paid in advance and services for these expenses are not received immediately.

Loss of accounts receivable

Loss of receivables is a form of loss that occurs because of the principle that the receivables recorded in the balance sheet financial statements only have the nominal receivables that are expected to be collected by the company.

Shrinkage

Depreciation or depreciation is something that can change the original cost of fixed assets.

Steps to Make Adjusting Journal Entries

Complete the trial balance

Before you make adjusting entries, you prepare a trial balance first. A trial balance is an accounting report that includes each transaction in the general ledger. The trial balance functions as a tool for recording, analysis, monitoring, and checking all financial transactions.

Prepare Adjusting Journal

The second stage, you just compiled the adjusting journal. In making adjustments there are accounts that you must adjust such as income, expenses, and equipment.

Creating a Trial Balance followed Adjustments

Next, the process of preparing a balance sheet after adjusting entries, usually includes an income statement, cash flow statement, balance sheet, and others.

Example of Adjusting Journal Entries

Adjusting Journal Entry - Overview, Types, Examples

Adjusting Journal Entries (Example)

Adjusting Entries Examples (Step by Step Adjusting Journal Entries)

Conclusion

If there are mistakes at the beginning, it will be more difficult at the end. To make it easier for you to manage your books and all journals in your business, you can use accounting software that has the best features, is easy to use, and can minimize bookkeeping errors and fraudulent actions that your employees can do.

Interest in getting savvy tips for improving your business efficiency?

Vanecia
Full-time Internship Content Writer at HashMicro | Content is the reason search began in the first place.

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Get FREE Business Software Consultation via WhatsApp

Rachel-Panjaitan

Rachel Panjaitan
Typically replies within an hour

Rachel Panjaitan
Need Help?
Chat with our experts for a free consultation by WhatsApp.
1:40
+6587776207
×
Chat with Us