Question

What are five types of adjusting entries? Define each and provide and example of each.

Answer 1

Answer:

Five types of Adjusting entries:

1	Accrued revenues
2	Accrued expenses
3	Deferred revenues
4	Deferred expenses
5	Depreciation expense

1.Accrued revenues:

Revenues have been earned, but the sales invoices have not yet been processed

Example: Sold goods to customer at the end of current accounting period but invoice have not yet been processed.

2.Accrued expenses:

Expenses have been incurred but not paid.

Example: Salaries accrued but not paid in the current month.

3.Deferred revenues:

Cash received in advance from customers has been earned.

Example: Sales was made or Services have been performed for the cash received in advance from the customer.

4.Deferred expenses:

Cash paid in advance for future expense has been accrued.

Example: Prepaid insurance, prepaid rent etc.

5.Depreciation expense:

Depreciation expense should be charged on 'Depreciable assets' at the end of each accounting period.

Example: Depreciation on equipment