04 Discussion - Data Sharing Business Management degree Computer focused princip
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Question
04 Discussion - Data Sharing
Business Management degree
Computer focused principles homework
Adjusting journal entries are used to update the balances in the accounts to the correct amount based on generally accepted accounting principles (GAAP). Let's share some examples and some entries for the closing process.
First Post: Describe when an organization would have to make an adjusting journal entry, provide an in-depth example, real or fictional.
Second Post: Choose either your post or another student post and create the journal entry that you would create in QuickBooks to create that adjusting journal entry.
Explanation / Answer
1. Adjusting entries are period end journal entries mainly for accruals and amortizations and depreciations.
For Example The prepaid Insyurance account is debited and cash credited when an insurance amount covering 2 years from Jan of current year to Dec of next year is paid. Suppose the amount paid is $24,000. The monthly charge is $1,000.
At the year end the adjusting entry will have to be passed for crediting the amount of prepaid insurance expired in 12 months .
Similarly suppose the organization have a note receivable od $10,000 ( interest rate 10% ) for 6 months and the note received on Dec 1 . So for the year one months ineterst revenue has to be recognized by Crediting the interest revenue for 1 month and debiting Accrued Revenue Asset Account.
Such type of adjustments that are not carried out in regular subsidiary ledgers are passed during closing operation.
2.
The entry for Prepaid Amortization will be
Prepaid Insurance Cr $12,000
Insurance Expense Dr $12,000
The adjusting entry for Accrued Interest will be :
Interest Revenue Cr $82
Accrued Interest Dr $82
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