Understanding Adjusting Entries in English Accounting

Accounts in English Adjusting Entries

Adjusting Entries purpose of adjusting entries. Prepaid expenses. Unearned revenue. Accrued expenses. Accrued revenue.

For purposes of measuring income and preparing financial statements, the life of a business is divided into a series of accounting periods This practice enables decision makers to company, the financial statements of successive periods and to identify significant trends. But measuring net income for a relatively short accounting period such as a month even a year poses a problem because some business activities affect the revenue and expenses of multiple accounting periods. Therefore, adjusting entries needed at the end of each accounting period to make certain that appropriate amounts of revenue and expense are reported in the company's income statement. The purpose of adjusting entries

Prepaid expenses. Prepaid expenses: Expenses paid in cash and specific more accounting period. There are two methods to treatment the adjusting entries: 1. Assets method: used or Expenses paid in cash and recorded as assets before they are consumed. 2. Expense method Expanses paid in cash and recorded as expenses before they are used or (consumed).

Accrued expenses are expenses incurred but not yet paid or recorded at the statement date. Accrued expenses result from the same causes as accrued revenues and include interest, rent, taxes and salaries. Accrued Expenses/payabl e expenses

Revenue received in cash specifies more accounting period. There are two method to treatment the adjusting entries:- 1. Liabilities Method Revenues received in cash and recorded as a liabilities before they are earned. 2. Revenue Method Revenue received in cash and recorded as revenue before they are earned. Unearned Revenue

Revenue earned but not yet received in cash or record Accrued revenue Receivable revenue