Accounting 280 (Financial) Adjusting Entries For your main Discussion post, desc

Question

Accounting 280 (Financial)

Adjusting Entries

For your main Discussion post, describe at least two typical adjusting entries a service-type business would need to record to bring account balances up-to-date. For your examples, one of the adjusting entries should be an accrual and another a deferral. You may use similar examples as those in your textbook and you may also research other typical adjusting entries for service-type companies. Be sure to address the following questions:

What are the purposes of each of your example adjusting entries?

Why are these adjusting entries required?

What if the company does not record these adjusting entries? Would financial statements be accurate? Why or why not?

Should the adjusting entries described be posted to the general ledger before preparing an adjusted trial balance? Why or why not?

For your replies, comment on the differences and/or commonalities between the posted adjusting entries and consider the following questions: Do you agree that these entries must be made before preparing financial statements? What new insight regarding adjusting entries have you gained from your classmates’ posts? Support your responses with further research and/or additional adjusting entry examples.

Explanation / Answer

Answer for question no.1

Example of Adjusting entries two types that a service type industry would need to record are as follows:

1) Cash a/c Dr

To unearned service revenue a/c Cr

Purpose is when cash is received for services yet to be provided, this accounting entry is to be recorded.

If this is already recorded as revenue then adjustment needs to be made to revenue as follows:

Service revenue a/c Dr

To Unearned service revenue a/c Cr

And for recognizing revenue in the period in which service is provided, entry is

Unearned service revenue a/c Dr

To Service revenue a/c Cr

Another example is as follows:

Salaries expense a/c Dr

To salaries payable a/c Cr

Purpose of making this entry is for salaries that are due and are yet to be paid. For example the company pays its employees on 1st of every month,So, at the end of the year december salaries are due but are paid on January 1st.

So, the above mentioned adjusting entry is passed.

Answer for question no.2:

These adjustment entries are required to record the expenses and gains of the period in the period to which they are relavant. ie., matching concept, income and expenses incurred to earn such income are to be recorded in the period to which they belong

Answer for question no.3:

If the company doen not record these adjusting entries, then the financial statements does not reflect the correct result of operations of that company for such period. Hence, the financial statements are considered to be inaccurate.

Answer for question no.4:

Adjusting entries are posed to general ledger and then adjusted trail balance is prepared. Reason for this is to adjust the balances in the ledgers of the respective accounts. These ledgers would then reflect the correct balances, and are carried forward to the next financial period.

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