CENTURY 21 ACCOUNTING © Thomson/South-Western

LESSON 16-1LESSON 16-1

Recording Adjusting Entries

CENTURY 21 ACCOUNTING © Thomson/South-Western

RECORDING ADJUSTING ENTRIESRECORDING ADJUSTING ENTRIES

General ledger account balances are changed only by posting journal entries

Two types of journal entries change general ledger account balances at the end of a fiscal period: Adjusting entries bring general ledger account balances up to date Closing entries prepare temporary accounts for the next fiscal period

Adjusting entries recorded in a work sheet are journalized in a general journal The adjusting entries are entered on a new general journal page.

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LESSON 16-1

CENTURY 21 ACCOUNTING © Thomson/South-Western

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LESSON 16-1

ADJUSTING ENTRIES RECORDED ADJUSTING ENTRIES RECORDED FROM A WORK SHEETFROM A WORK SHEET

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page 481

22 11 44 5566 77

1. Heading

2. Date

3. Identify the first adjustment

4. Account debited

5. Debit

6. Account credited

7. Credit

8. Continue down the Adjustments columns

CENTURY 21 ACCOUNTING © Thomson/South-Western

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LESSON 16-1

ADJUSTING ENTRY FOR ALLOWANCE ADJUSTING ENTRY FOR ALLOWANCE FOR UNCOLLECTIBLE ACCOUNTSFOR UNCOLLECTIBLE ACCOUNTS page 482

The adjusted balance of Allowance for Uncollectible Accounts is the amount of the current accounts receivable the business expects to become uncollectible

CENTURY 21 ACCOUNTING © Thomson/South-Western

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LESSON 16-1

ADJUSTING ENTRY FOR ADJUSTING ENTRY FOR MERCHANDISE INVENTORYMERCHANDISE INVENTORY page 482

The adjusted balance of Merchandise Inventory is the amount of the Inventory counted at the end of the fiscal year.

CENTURY 21 ACCOUNTING © Thomson/South-Western

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LESSON 16-1

ADJUSTING ENTRY FOR SUPPLIESADJUSTING ENTRY FOR SUPPLIES——OFFICEOFFICE page 483

• The adjusted balance of Supplies – Office is the amount of office supplies on hand at the end of the year.

• The debit to Supplies Expense recognizes the amount of supplies used during the period

CENTURY 21 ACCOUNTING © Thomson/South-Western

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LESSON 16-1

ADJUSTING ENTRY FOR SUPPLIESADJUSTING ENTRY FOR SUPPLIES——STORESTORE page 483

• The adjusted balance of Supplies – Store is the amount of store supplies on hand at the end of the year.

• The debit to Supplies Expense recognizes the amount of supplies used during the period

CENTURY 21 ACCOUNTING © Thomson/South-Western

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LESSON 16-1

ADJUSTING ENTRY FOR ADJUSTING ENTRY FOR PREPAID INSURANCEPREPAID INSURANCE page 484

• The adjusted balance of Prepaid Insurance is the amount of insurance not used yet.

• The debit to Insurance Expense recognizes the amount of insurance used during the period

CENTURY 21 ACCOUNTING © Thomson/South-Western

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LESSON 16-1

ADJUSTING ENTRY FOR DEPRECIATIONADJUSTING ENTRY FOR DEPRECIATION——OFFICE EQUIPMENTOFFICE EQUIPMENT page 484

• The adjusted balance of Accumulated Depreciation is the cumulative amount of depreciation expensed over the life of the assets.

• The debit to Depreciation Expense recognizes the amount of depreciation expensed during the period

CENTURY 21 ACCOUNTING © Thomson/South-Western

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LESSON 16-1

ADJUSTING ENTRY FOR DEPRECIATIONADJUSTING ENTRY FOR DEPRECIATION——STORE EQUIPMENTSTORE EQUIPMENT page 485

CENTURY 21 ACCOUNTING © Thomson/South-Western

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LESSON 16-1

ADJUSTING ENTRY FOR FEDERAL ADJUSTING ENTRY FOR FEDERAL INCOME TAXESINCOME TAXES page 485

• Posing the extra payment of Federal Income Tax expense creates the tax liability for the remaining tax owed.