ADJUSTING JOURNAL ENTRIES

• ADJUSTING ENTRIES – Purpose is to MAKE SURE THE T ACCOUNTS ARE CORRECT. (REFLECT ECONOMIC REALITY)

REASONS FOR ERRORS

• T ACCOUNTS ARE OFTEN WRONG DURING THE YEAR. WHY?

• JOURNAL ENTRY NOT MADE (Omiteed)• JOURNAL ENTRY MADE FOR WRONG

AMOUNT• JOURNAL ENTRY MADE TO WRONG ACCOUNT• PASSAGE OF TIME• THEFT

TO ADJUST CASH

• CASH SHORT AND OVER EXPENSE XXX• CASH XXX

TO ADJUST MARKETABLE SECURITIES

• LOSS ON MARKETABALE SECURITIES XXX• MARKETABLE SECURITIES XXX

TO ADJUST ACCOUNTS RECEIVABLE

• BAD DEBT EXPENSE XXX• ALLOWANCE FOR DOUBTFUL ACCOUNTS XXX

TO ADJUST INVENTORY

• COST OF GOODS SOLD XXX• INVENTORY XXX

TO ADJUST PREPAIDS

• SUPPLIES EXPENSE XXX• SUPPLIES

TO ADJUST EQUIPMENT

• DEPRECIATION EXPENSE XXX• ACCUMULATED DEPRECIATION XXX

TO ADJUST FOR NOTES PAYABLE

• INTEREST EXPENSE XXX• INTEREST PAYABLE XXX

THERE ARE OTHER ADJUSTING ENTRIES

• THE COMMON ONES HAVE BEEN JUST COVERED

THOUGHT PROCESS FOR ADJUSTING ENTRIES

1. WHAT IS THE AMOUNTS IN THE T ACCOUNT?2. WHAT SHOULD BE THE AMOUNT FROM THE REAL WORLD?3. WHAT IS THE DIFFERENCE BETWEEN THE TWO4. MAKE THE NECESSARY JOURNAL ENTRY