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

Newbie Mentor and one of the influential author in the Philippines setting. His also the founder of PAM Academy and Developer of PAM PSE TRACKER application.
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