Adjusting Entries

Typical adjusting entries:

  1. Accrual of Income
  • revenues earned but not yet collected.

2. Accrual of expense

  •    expenses that have been incurred but are not yet recorded.

3.  Prepayments

2 methods of recording:

a. Asset

b. Expense

**To determine the method used; the part reduced at the end of reporting period.

4. Unearned / Deferrals – advance cash received.

a. Income

b. Liability Method

5.  Bad Debts or Doubtful Accounts

6. Depreciation and Amortization

7. Setting up of Ending Inventory

Calculations of Ending Balances:

Accrued Expense Beg                                xx

Add: Expense during the period              xx       Accrual Basis

Total Expense To Be Paid                           xx

Less: Cash Paid during the period          xx       Cash Basis

Accrued Expense End                               xx


Accrued Income Beg                                  xx

Add: Income Earned during the Year   xx         Accrual Basis

Total income to be Collected                   xx

Less: Cash Collected                                   xx        Cash Basis

Accrued Income End                                  xx


Prepayments / Prepaid

Prepaid Beg                                               xx

Add: Cash Payments                               xx

Total Prepayments                                   xx

Less: Expired Portion                              xx

Prepaid End                                                xx


Deferrals / Unearned

Unearned Beg                                            xx

Add: Cash Received                                 xx

Total Unearned                                          xx

Less; Earned Portion                                xx

Unearned End                                            xx


Expense Accrual Basis    XX

P – E                                    XX

A – B                                    XX

P  – B                                   ( XX)

A – E                                     (XX)

Expense Cash Basis        XX


Income Accrual Basis     XX

D – E                                   XX

A – B                                   XX

D – B                                   XX

A – E                                   XX

Income Cash Basis           XX




About Jonathan Ruiz CPA

Entrepreneur, CPA Mentor, Stock market Newbie Mentor, Influential Author and Master's Degree in International Business graduate in Hult International Business School, UK. A father of two lovely daughters.
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