Accounting | Deferral | Accrual



Adjusting entries, Closing entries, Reversing entries, Rectifying entries

Course Details
Course Name Course Code : Principles of accounting : acc-

Burhan Uddin Abdullah al Muhaimin Muminul Hoque 26th Batch (Fall Semester). . ID 1003010016 1003010017 1003010018 1003010022 Date of Submission : 20 August. 2011. Nazrul Islam Lecturer.Submitted To : Md. Department of Business Administration Submitted By : Name Abdus Sabur Sabir Md.

reversing entries. Md. rectifying entries for writing a report. They have reviewed all the relevant literature for collecting of data. Sylhet Letter of Certificate I am extremely pleased to declare that the following group of students has been given with the topic “Adjusting entries. closing entries. Sylhet 2nd August. I believe they will try to do their best in all phase of their live. I also certify that the paper is an original one and has not been submitted elsewhere previously for publication in any form.Leading University. 2011 . I have supervised them throughout the preparation of the paper. Nazrul Islam Senior Lecturer Department of Business Administration Leading University.

Senior Lecturer Department of Business Administration Leading University. Sylhet Subject: Letter of Submittal/Submission Dear Sir. rectifying entries for writing a report for presentation and collection of primary and secondary data. reversing entries. Nazrul Islam.To. We tried to collect all possible information and make this paper acceptable to all but there can be still existing mistake. we would like to request you to accepted our paper and permit us to present it before the panel of experts. Thank you in advance for your assistance and advice in this connection. We were given the topic “A study on Adjusting entries. closing entries. To do so. and the assigned organization. Burhan Uddin Abdullah al Muhaimin Purobi Rani Sarker Muminul Hoque 1003010016 1003010017 1003010018 1003010009 1003010022 . journals. Md. we sought the relevant information in books. So we like to request you to consider if any fault is found in paper. Lastly. Yours obediently Name Registration No Abdus Sobur Sabir Md.

Acknowledgement This is to thank our honorable teacher MD. . website and also class lecture of our teacher. Nazrul Islam for assigning us to prepare an assignment on a topic which is very important and also interesting. We would like to thank our honorable teacher MD. Though we have collected information from book. Nazrul Islam and again sorry if we have any mistake while making this assignment. It is prepared following all suggestion of our course teacher and we tried to make no mistake while preparing this assignment.

Rectifying Entries.Limitation of the study • • • • Lack of information available Lack of assistance from the Company people Shortage of time Not much specific information regarding the Organization’ Table of Content 1. 4. Closing Entries. Reversing Entries. 2. 3. Conclusion. Adjusting Entries. . 5.

where trading ventures began to require more capital than a single individual was able to invest. This development resulted in a split of accounting systems for internal (i. improving over the years and advancing as business advanced. The communication is generally in the form of financial statements that show in money terms the economic resources under the control of management. named accounting. Today.000 years. The principles of accountancy are applied to business entities in three divisions of practical art. Early accounts served mainly to assist the memory of the businessperson and the audience for the account was the proprietor or record keeper alone. accounting is called "the language of business" because it is the vehicle for reporting financial information about a business entity . and summarizing in a significant manner and in terms of money. Accounting is defined by the American Institute of Certified Public Accountants (AICPA) as "the art of recording. of financial character. classifying. the art lies in selecting the information that is relevant to the user and is reliable. and auditing. and interpreting the results thereof. as investors without firsthand knowledge of their operations relied on accounts to provide the requisite information. were found in Mesopotamia (Assyrians). the earliest accounting records. Accountancy is defined by the Oxford English Dictionary (OED) as "the profession or duties of an accountant". bookkeeping.e. financial accounting) purposes." Accounting is thousands of years old.e.Accountancy is the process of communicating financial information about a business entity to users such as shareholders and managers. in part at least. which date back more than 7. Accounting evolved. The development of joint stock companies created wider audiences for accounts. so double-entry bookkeeping first emerged in northern Italy in the 14th century. management accounting) and external (i. transactions and events which are. and subsequently also in accounting and disclosure regulations and a growing need for independent attestation of external accounts by auditors. The people of that time relied on primitive accounting methods to record the growth of crops and herds. Cruder forms of accounting were inadequate for the problems created by a business entity involving multiple investors.

The current ratio is current assets divided by current liabilities.dividends = ending retained earnings. This is followed by the retained earnings statement. the presentation of financial accounts is very structured and subject to many more rules than management accounting. or loss .to many different groups of people. The basic accounting equation is assets = liabilities + stockholders' equity. or IFRS or US GAAP. which is beginning retained earnings + net income . An "income summary" account may be used to show the balance between revenue and expenses. Closing entries are journal entries made at the end of an accounting period to transfer temporary accounts to permanent accounts. Management accounting is concerned primarily with providing a basis for making management or operating decisions. This process is used to reset the balance of these temporary accounts to zero for the next accounting period. or they could be directly closed against retained earnings where dividend payments will be deducted from. Because these users have different needs. The foundation for the balance sheet begins with the income statement. managers. owner-managers and auditors. This is the balance sheet. The body of rules that governs financial accounting in a given jurisdiction is called Generally Accepted Accounting Principles. which is revenues . Other rules include International Financial Reporting Standards.expenses = net income or net loss. Accounting that concentrates on reporting to people inside the business entity is called management accounting and is used to provide information to employees. The debt to total assets ratio is total assets divided by total liabilities. Accounting that provides information to people outside the business entity is called financial accounting and provides information to present and potential shareholders. creditors such as banks or vendors. . and government agencies. economists.dividends = ending retained earnings or beginning retained earnings . financial analysts.

When this cash is paid. However the actual cash may be received or paid at a different time. The revenue recognition principle is the basis of making adjusting entries that pertain to unearned and accrued revenues under accrual-basis paid or received after received before consumption) consumption Prepaid expenses: for expenses paid in Accrued expenses: for expenses Expenses cash and recorded as assets before incurred but not yet paid in cash or they are used recorded Unearned revenue: for revenues Accrued revenues: for revenues earned Revenues received in cash and recorded as but not yet recorded or received in cash liabilities before they are earned Prepayments Adjusting entries for prepayments are necessary to account for cash that has been received prior to delivery of goods or completion of services. The paid or Accrual . supplies). Then. revenues and associated costs are recognized in the same accounting period. The cash is paid up-front at the start of the subscription. They are sometimes called Balance Day adjustments because they are made on balance day. based on sales basis method. adjusting entries are journal entries usually made at the end of an accounting period to allocate income and expenditure to the period in which they actually occurred.g.g. it is first recorded in a prepaid expense asset account.Adjusting In accounting/accountancy. A company receiving the cash for benefits yet to be delivered will have to record the amount in an unearned revenue liability account. insurance) or through use and consumption (e. Therefore the initial reporting of the receipt of annual subscription fee is indicated as: . Example Assume a magazine publishing company charges an annual subscription fee of £12. an adjusting entry to recognize the revenue is used as necessary. is recognized upon delivery. Based on the matching principle of accrual accounting. Types of adjusting entries Most adjusting entries could be classified this way: Prepayments (Deferral . the account is to be expensed either with the passage of time (e. rent.

Inventory In a periodic inventory system. an adjusting entry is used to determine the cost of goods sold expense. taxes. Expenses for interest. so they are recorded in a payable account. The depreciation of fixed assets. for example. rent. is an expense which has to be estimated. Accrued expenses have not yet been paid for.Debit | Credit ---------------Cash £12 | Unearned Revenue | £12 | The adjusting entry reporting each month after the delivery is: Debit | Credit ---------------Unearned Revenue £1 | Revenue | £1 | The unearned revenue after the first month is therefore £11 and revenue reported in the income statement is £1. but their cash payment have not yet been recorded or received. it is recorded as a receivable. services have been performed or goods have been delivered). Accruals Accrued revenues are revenues that have been recognized (that is. When the revenue is recognized. The entry for bad debt expense can also be classified as an estimate. Estimates A third classification of adjusting entry occurs where the exact amount of an expense cannot easily be determined. and salaries are commonly accrued for reporting purposes. This entry is not necessary for a company using perpetual inventory. Closing .

Rectifying Reversing .

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