Adjusting Entries
Adjusting Entries
According to accountingcoach.com (n.d.), adjusting entries are accounting journal entries that convert a company's accounting records to the accrual basis of accounting. An adjusting journal entry is typically made just prior to issuing a company's financial statements.
FOUR TYPES OF ADJUSTING ENTRIES:
Prepayments-is a settlement of debt or installment payment before done before its due date (Investopedia, n.d.).
Unearned Sales-represents cash received and recorded as liabilities before sales is earned because goods are still to be provided to a customer.
Bad Debts-are accounts receivable that a company does not expect to collect and has written off to income statement as an expense. Bad debts are also called irrecoverable debts (Accounting Explained, n.d.).
Depreciation-refers to the decreasing price of the equipment bought by the business.
EXAMPLES ON HOW THESE ARE DONE:
Prepayments
On March 1, the business acquired store supplies worth ₱10, 000.
By the end of the month, only ₱5,000 of the store supplies are consumed.
ADJUSTMENT:
Debit: Store Supplies Used 5, 000
Credit: Store Supplies Unused 5, 000
Unearned Sales
The Sales recorded is worth ₱350, 000.
By the end of the month, ₱80, 000 of the sales recorded is still unearned.
ADJUSTMENT:
Debit: Sales 80, 000
Credit: Unearned Sales 80, 000
Bad Debts
On April 3, LANGGAM TRADING bought ₱30, 000 worth of supplies on account.
By the end of the month, 10% of the account receivable cannot be collected.
ADJUSTMENT:
Debit: Bad Debts 3, 000
Credit: Allowance for Bad Debts 3, 000
Depreciation
(Note):To compute the amount for annual depreciation expense, use the formula below.
Original Cost – Scrap Value /Number of years
Example:
The business purchased Furniture & Fixtures worth ₱200, 000.
By the end of the month, the equipment acquired is expected to last for 10 years with scrap value of ₱40, 000.
200, 000 – 40, 000/10
32, 000/12 = 2,666.67
You will see that 32,000 was divided to 12 to obtain the monthly depreciation.
ADJUSTMENT:
Debit: Depreciation Expense – Furniture & Fixtures 2,666.67
Credit: Accumulated Depreciation – Furniture & Fixtures 2,666.67
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SCREENSHOTS OF THE SITES I USED FOR SOURCES:
REFERENCES:
https://www.accountingcoach.com/adjusting-entries/explanation
http://www.myaccountingcourse.com/accounting-cycle/adjusting-entries
http://www.investopedia.com/terms/p/prepayment.asp
http://accountingexplained.com/financial/receivables/bad-debts
These are the websites that helped me to define what a Adjusting Entries is. Also, it helped me to identify the different types of Adjusting Entries and how they are done.
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Learning Reflections
Sir Randy Palestina, our MOST HANDSOME TEACHER, told us that adjusting entries would be tough this year but I told myself that it would just be easy for me since I already have background knowledge about it because we have tackled it already last year. Sadly, I got low grades on some of my job sheets because I was not able to finish the 12-column worksheet mainly because I have spent majority of my time on adjusting entries because I was really struggling in it. After reflecting about what I should do to be better at adjusting entries, I realized that I just need to make time on reviewing the handouts about adjusting entries that Sir Randy gave us and keep on practicing at home.
Summary
In short, I just realized that adjusting entries is really tough that is why every ASPIRING BOOKKEEPER should be VERY DETERMINED on reviewing and practicing adjusting entries because it is the only that they would fully understand how to do adjusting entries. TO ALL THE ASPIRING BOOKKEEPERS OUT THERE, NEVER GIVE UP ON STUDYING EVERY LESSON IN BOOKKEEPING!!! JUST KEEP GRINDING BECAUSE IT'S ALL WORTH IT!!!