Question

Describe the two main types of adjusting entries (deferrals and accruals), and give at least 1 example of EACH of the 2 types. (ie, You should have 2 complete journal entries – 1 deferral entry, and 1 accrual entry – Be sure to have a debit account and a credit account with amounts in your entry)

. Explain what an Unadjusted Trial Balance is, and the relationship between the Unadjusted Trial Balance, adjusting journal entries, and the Adjusted Trial Balance.

Finally, what do we do with the Trial Balance, and what statements is it used to produce?

Answer 1

The two main categories where adjustments arise are:
Accruals: Revenues earned or expenses incurred that have not been previously recorded.
example;
1.Accrued Revenue

DR Accounts Receivable 100

CR Sales Revenue 100

Deferrals: Receipts of assets or payments of cash in advance of revenue or expense recognition.
example :
Deferred Revenue

DR Unearned Revenue 100

CR Sales Revenue 100

The unadjusted trial balance is the listing of general ledger account balances at the end of a reporting period, before any adjusting entries are made to the balances to create financial statements.
1.Adjusted trial balance is used after all the adjustments have been made to the journal while an unadjusted trial balance is used when the entries are not yet considered final in a certain period.
2.An unadjusted trial balance is basically used before all the adjustments will be made. The adjusted kind, on the other hand, is used when adjusting the two sides of the ledger – the debit and credit.
3.An adjusted trial balance shows an additional account regarding the net/loss of income.
Unadjusted trial balance is the first list of ledger account balances, compiled without making any period end adjustments. Adjusted trial balance is the trial balance compiled after considering adjustment entries at the close of the accounting period.

A trial balance is a list of all the general ledger accounts (both revenue and capital) contained in the ledger of a business. This list will contain the name of each nominal ledger account and the value of that nominal ledger balance. Each nominal ledger account will hold either a debit balance or a credit balance. The debit balance values will be listed in the debit column of the trial balance and the credit value balance will be listed in the credit column. The trading profit and loss statement and balance sheet and other financial reports can then be produced using the ledger accounts listed on the same balance.