StudentShare solutions
Triangle menu

Adjusting entries - Assignment Example

Nobody downloaded yet

Extract of sample
Adjusting entries

One of the steps included in the accounting cycle is the recording of adjusting entries. Adjusting entries are always needed every time a company prepares financial statements. At the end of the accounting cycle the four financial statements are ready to be prepared and published for the users of financial information. “Adjusting entries are needed to ensure that the revenue recognition and matching principles are followed” (Weygandt & Kieso & Kimmel, 2003, pg. 91). Adjusting entries are necessary because they are one of the steps of the accounting cycle. The fourth step of the accounting cycle is to journalize and post adjusting entries (Cliffnotes, 2011). Accounting entries exist to make sure revenues are recorded in the period in which they are earned, and expenses are recognized in the period in which they are incurred (Weygandt, et al. 2003). Accounting results are supposed to be reliable and accurate. The use of adjusting entries adds validity to the claim of accuracy in accounting work. A financial statement that benefits from adjusting entries is the balance sheet because adjusting entries allow accountants to adjust the assets, liabilities, and equity accounts. The four types of adjusting entries are prepaid expenses, unearned revenues, accrued expenses and accrued revenues. Prepaid expenses are expenses that are paid in cash by a company before they are consumed. These types of transactions occurred for a variety of reasons including contractual obligations. In the insurance industry it is common practice for insurance coverage to be signed in yearly contracts that must be paid in full prior to coverage starting. In this type of transaction the company receives benefits as time passes. An adjusting entry is necessary to record the actual consumption of the expense. These types of adjusting entries are typically recorded on a monthly basis. The journal entry to record this adjusting entry is a debit to insurance expense and a credit to prepaid expenses. Another example of a prepaid expense is the recording of depreciation. Depreciation is recorded through the passage of time on a monthly basis. The second type of adjusting entries is unearned revenues. Unearned revenues occur when a client pays in cash for a service that has not been provided to them. An unearned revenues account is considered a liability because the company that took the payment owes the service to the client. A practice in which unearned revenues are a common occurrence is in the law practice. A lot of companies pay corporate lawyers retainers to be on call for any legal problem that may occur in the future. The lawyer must record the transaction when they are originally paid as unearned revenue. When the lawyer provides a legal service for the client the liability is reduced through an adjusting entry. The adjusting entry to record a service rendered to a client that had an unearned revenue pending is a debit to unearned revenue and a credit to service revenue. The third type of adjusting entry is accrued revenues. Accrued revenue refers to transactions in which the business earned an income, but has not yet received payment for the work. Accrued revenues can accumulate over time in cases such as unpaid rent. Sometimes accrued revenues occur as a consequence of the company not billing the customer at the time the service is rendered. The typical adjusting entry for accrued revenues once service is provided is a debit to account receivable and a credit to service revenue. Companies that always receive payment in the form of cash at the moment the service is provided would not accumulate any accrued revenues. The fourth type of adjusting ...Show more


The functionality of the double entry journal system relies on the application of a specific logarithm known in the accounting world as the accounting cycle. One of the steps included in the accounting cycle is the recording of adjusting entries…
Author : louveniaeffertz
Adjusting entries
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the assignment on your topic
"Adjusting entries"
with a personal 20% discount.
Grab the best paper

Check these samples - they also fit your topic

Auditing Exercise for Property Plant and Equipment
In terms of internal control, the audit of items 1 and 3 includes the implementation of relevant audit procedures on the proper and complete recording of acquisitions and dispositions of buildings, machinery, equipment, improvements and the like. Depreciation amount should comply with company policies such as 25 years for buildings and 10 years for machinery and equipment (Whittington, 2005).
3 pages (750 words) Assignment
Corporate Finance Stratergy
7 pages (1750 words) Assignment
E-Learning/Geometry Shapes Lesson/Blog Entries
The learning process that is executed in a class or outside the class by the use of electronic technology is termed as E-learning. Today, e-learning is being implemented in every country of the world because of the educational advancements; it has become the necessity of students to use technology and electronic media as a part of their studies.
4 pages (1000 words) Assignment
The Payroll and Personnel Cycle
As the discussion, The Payroll and Personnel Cycle, stresses the payroll and personnel cycle is one that, often, requires diligent monitoring because it is a point where fraudulent acts from within the company can occur. When auditing this portion of the accounting cycle they, primarily, focus upon finding verification.
3 pages (750 words) Assignment
Five Entries in an Activist Diary
Five Entries in an ‘Activist Diary’.The Flamenco Flash Mobs (August 15, 2012) The Spain’s creative protests, the Flamenco Flash Mobs, is a protest that began by a small crowd gathering in the Madrid’s La Latina for a festive dedication to the City’s patrons also known as the virgin of the Paloma.
2 pages (500 words) Assignment
On January 10, Mary Dawes uses her Pierson Co. credit card to purchase merchandise from Pierson Co. for $9,000. On February 10, Dawes is billed for the amount due of $9,000. On February 12, Dawes pays $5,000 on the balance due. On March
5 pages (1250 words) Assignment
The Adjusting Process discussion
The entries made to update the financial records, are regarded as, adjusting entries. These entries produce an impact on at least a single income statement on the financial records and a single balance sheet. The
1 pages (250 words) Assignment
Journal entries 1 and 2
were to list the challenges that faced nurse educators in their role and expectations and the other was to discuss with him on a more personal level how he managed to keep his professional and personal life apart bearing in mind one of the roles of a nurse educator like himself
4 pages (1000 words) Assignment
Walmart's Adjusting Entries
This can be attributed to the fact that the company has been increasing the cost of the goods sold thereby leading to an increase of the total revenue each year. Economic
1 pages (250 words) Assignment
Journal Entries
Due to the nagging voice of my mother, I went with her to my doctor to prove her wrong. After careful evaluation, my doctor prescribed lithium and Clozapine. Honestly, I do not feel like taking
1 pages (250 words) Assignment
Comments (0)
Click to create a comment
Let us find you another Assignment on topic Adjusting entries for FREE!
Contact us:
Contact Us Now
FREE Mobile Apps:
  • About StudentShare
  • Testimonials
  • FAQ
  • Blog
  • Free Essays
  • New Essays
  • Essays
  • The Newest Essay Topics
Join us:
Contact Us