Acounting Entries

ADJUSTING ENTRIES

BY

MELANIE.KELLY7

ACCOUNTING

In accounting there is many different things that you need to know, the one that we are going to go over today is adjusting entries.

Adjusting entries are to ensure that revenue and expenses are properly recorded under accrual basis. Adjusting journal entries are made in the general ledger to record revenues that have not been earned or recorded and expenses that have been made but not yet recorded. This process is fourth step in the accounting cycle, which happens at the end of the accounting period after the trial balance is done. After the adjusting entries are journalized and posted and adjusted trial balance is done, from there the financial statements are prepared. Adjusting entries can vary significantly across companies, they happen because the exchange of cash does not always match with the earnings of revenue or an expense. This could be like cash received after revenue is earned.

There are four types of adjusting entries that are used as I am going to go thru all of them.

Accrued revenues which are also called accrued assets these are revenues already earned but not paid for or posted to the general ledger. Another name for this could be accounts receivable. When this happens the receivable account is decreased and the cash account is increased.

EXAMPLE A customer purchased a new machine but didn’t pay for it.

Cash Accounts receivable

0 1,000

1,000 0

Deferred revenue is when revenue received in cash and recorded as liabilities before it is earned. Deferred revenue is a liability to the entity until it is earned. This is like a customer paid a deposit on a new machine but has yet to receive it. You would record the deposit as unearned revenue.

EXAMPLE

Revenue 5,000

Deferred...