adjusting entries

   ADJUSTING ENTRIES

Adjusting entries are also known as journal entries which are pass at the end of current years to make the the correction of account before financial statement are prepared. It is also used in matching principles, it is forth steps of accounting cycle.

There are three types of adjusting entries.

• ·   Income
•      Expense
•       Non Cash

Expense

Expense are those which is used by company

Prepaid expense or unearned revenue

Prepaid expenses are those expense which are paid by the company but not yet consumed. Example insurance is a good example of prepaid expense. Incurred expense are only paid on time. Its also current assets of the company

Unearned revenue are also recorded because these consist of income received but no provided services to their customer. Its also liability of the company

Accrued expense or accrued revenue

Accrued expense is those expense which are company incurred but not pay for the period of time. Utilities bill is the good example of accrued expense. Utility bill of January is always due in February.

Other entries are also known as depreciation amortization entries .it also known as non cash expense entries. These expense are passed on the end of accounting period.

   Bianca pays 2,000$ for February rent in January.

                                             Closing journal entries

Date	Description	Debit	Credit
	Prepaid rent      Cash	2,000$	2,000$

                                           

    Bianca January sui gas bill was 200$ and is due in 15 febuary

                                    Closing journal entries

Date	Description	Debit	Credit
	Bill gas  expense      Accrued expense	2,00$	2,00$

Bianca lease hold improvement depreciation was 500$

                                    Closing journal entries

Date	Description	Debit	Credit
	Depreciation expense      Accumulated                   expense	500$	500$

On January , a customer prepays Bianca for hair dresser lessons for the next of 6 months.

Date	Description	Debit	Credit
	Cash      Unearned income	2500$	2500$

Bianca  employees  do works half a pay period, so Bianca l accrues $500 of wages

                                              Closing entries

Date	Description	Debit	Credit
	Cash      Unearned income	2500$	2500$