Adjusting Entries

Definition:

             Adjusting entries are journal entries made at the end of financial accounting year to adjust revenues and expenses to that accounting year where they actually occurred.

There are five basic types of adjusting entries:-

Accrued revenues :

                   It is also called accrued assets are revenues already earned but not yet paid or recorded.

 Entry :

                   Accrued Revenue (dr)

                                             Revenue  (cr)

 Unearned revenues:

                 it s also called deferred revenues are revenues received in cash and recorded as liabilities prior to being earned.

     

        Entry :

                           Revenue (dr)

                                                  Unearned Revenue(cr)

Accrued expenses:

                 it also called accrued liabilities are expenses already incurred but not yet paid or recorded.

      

        Entry:

                     Salaries Expense (dr)

                                            Salaries payable(cr)

Prepaid expenses:

           or deferred expenses are expenses paid in cash and recorded as assets prior to being used.

Entry:

                       Insurance expense (dr)

                                            Prepaid insurance(cr)

·        Other adjusting entries include depreciation of fixed assets, allowances for bad debts, and inventory adjustments.