Adjusting Accounting Entries
American InterContinental University
I have been asked by my supervisor to mentor a new accounting clerk in my department, I am hoping that when I’m done mentoring this person that they will understand accounting better. I am also hoping that my supervisor will be proud of me, and continue asking me to mentor new people, and hopefully give me a raise or a promotion.
To better understand accounting we need to know why adjusting entries are so important to a business. Adjusting journal entries are made at the end of each closing period to adjust the account balances. Most of the time, this is necessary in order to achieve a clean cut-off at the end of the accounting period, and to ensure the accounts are complete, and accurate. Current account balances may not represent correct balances, because some mistakes were identified in the posting of transactions, and/or the accounting records are not updated to reflect new transactions or amount changes in previous transactions. Examples would include amounts that were posted to the wrong accounts, and timing differences in recognizing revenues and expenses between the accrual and the cash basis of accounting. (Adjusting JE, 2010) Adjusting entries can be either temporary or permanent. If the entry is temporary at some point the adjusting entry will be reversed or another adjusting entry will be made to the account.
I will know explain the four types of adjusting entries ,as well as give an example of each entry from the manufacturing industry.
Accrued revenues (also called accrued assets) are revenues already earned but not yet paid by the customer or posted to the general ledger. An example of accrued revenue would be for a custom ordered machine that has been shipped FOB shipping point on the day the accounts receivable module is closed and the approval to bill the customer has not been received by the billing clerk. An adjusting entry would be recorded to recognize the revenue
References: Adjusting, EN. (2010). Adjusting entries in accounting. Retrieved from http://www.college-cram.com/study/accounting/accounting-cycle/adjusting-entries-in-accounting/ Adjusting, JE. (2010). Adjusting journal entries. Retrieved from http://accountinginfo.com/study/je/aje/index.htm