Question

Provide a thorough and broad overview of all four types of adjusting entries. In addition, provide an illustration of each type of adjusting entry.

Answer 1

Answer)

Types of adjusting entries:

1)Accrued incomes:

These are revenue for which you have already provided the customer with the good or service which he needs where you are eligible to receive the revenue but you have not received such revenue where you will debit Receivable accounts which leads to increase in current assets and credit sale account and when such revenue is received in bank or cash you will debit card and credit the Receivable account. Here the main intention is to record the revenue that is earned previously but received now.

For example, x LTD have supplied 3000 chocolates of $3000 to Walmart store at the beginning of the month on credit where the income for it will be paid by Walmart on month-end. The journal entry for it will be :

At the beginning of the month:

Walmart a/c $3000

To sales . $3000

At the end of the month adjusting entry will be:

Cash a/c. $3000

To Walmart. $3000

2) accrued expenses:

These are expenses which are already incurred but will be paid in later period. Here you are recording such entry to record the transaction for which you are liable to pay and got paid for your past laibility. Here to will debit the service or goods and credit payables accounts.

In the above example mentioned for accrued income say Walmart records the entry will x LTD as follows:

Purchases a/c. $3000

To x LTD . $3000

At the end of the month adjusting entry will be:

X LTD a/c . $3000

To cash . $3000

3)Deffered revenue:

This what an opposite to accrued revenue where you have already got the price but you still have to provide service or good and here you re order your liability of providing the service . Here you credit the revenue as unearned revenue or Deffered revenue and debit cash.

For example you got paid for paper bill for 2 months of $20 per month. Then you record the following entry:

Cash a/c $20

To Deffered revenue $20

And after the end of second month you record the following adjusted entry:

Deffered revenue $20

To paper bill. $20.

Deffered expenses:

Here you record the expenses as asset for which you have paid but still the benefit is pending and then adjusting entry will be passed after receiving sch benefit.

Here consider the above example of Deffered revenue where you are the person who paid for two months.The entry at beginning:

Deffered expense. $20

To cash . $20

The adjusting entry will be

Paper bill $20

To Deffered expense . $20.