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Adjusting Entries are journal entries that are made at the end of the accounting period, to adjust
expenses and revenues to the accounting period where they actually occurred. Generally
speaking, they are adjustments based on reality, not on a source document. This is in sharp
contrast to entries during the accounting period (such as utility bills or fees for services rendered)
that depend on source documents.
Preparing adjusting entries is a key step in the ongoing accounting cycle, coming right after
you’ve completed preparing a trial balance.
Accrued revenues (also called accrued assets) are revenues already earned but not yet
paid or recorded.
Unearned revenues (or deferred revenues) are revenues received in cash and recorded as
liabilities prior to being earned.
Accrued expenses (also called accrued liabilities) are expenses already incurred but not
yet paid or recorded.
Prepaid expenses (or deferred expenses) are expenses paid in cash and recorded as
assets prior to being used.
Other adjusting entries include depreciation of fixed assets, allowances for bad debts,
and inventory adjustments.
Accrued revenues — Say your company provided $1,600 worth of consulting services to
the Bogus Manufacturing Company over the past month, and today is the end of the
accounting period. The consulting hours will be billed and collected next month, well
past when you’ll be preparing a trial balance, financial statements, closing entries, etc. In
this case, you need an adjusting entry to account for the unbilled services:
Accrued expenses — If you pay weekly salaries and the accounting period ends mid-
week, you have accrued salary expenses that you haven’t yet paid. You’ll need an
adjusting entry to reflect the as-yet unpaid salaries:
Prepaid expenses — Let’s say you paid $3,000 for your property insurance six months
ago, and you still have six paid months remaining on the policy after this accounting
period. To accurately reflect the value and expense of the remaining policy, you need an
adjusting entry:
A: Earnings means profits and retained earnings is all the net profits one accumulated. Also known as
accumulated profit.
Anyway, I think what you are referring to is the transfer of net profit at the end of the year to retained
earnings. If so, these are the journal entries...
If you made a profit for the year, the profit and loss account would have a credit balance. So you:
If, however, the business made a loss for the year, the profit and loss account would have a debit
balance. So you do the opposite:
Dr Retained earnings
Cr Profit and loss account
Notice how the retained earnings gets the balance on the same side as what was for the profit and loss
account? If there was a credit balance in profit and loss (profit), then there ends up being a credit
balance in retained earnings.
how advance tax paid in current year also taken to provision for income
tax A/C in the same year??
TO bank a/c
2.. the end of the current year (ex:2014) we will self assesed and make provision for income
tax::
p&l a/c dr
3..in the next year (ex: 2015)if the selff assesed and income tax dept assesment is same means :::