The purpose of this memo is to inform you about the adjusting entries and the important of

them.

First of all, most of the companies today are following United States Generally Accepted
Accounting Principles (US-GAAP) and International Financial Reporting Standards
(IFRS).

According to GAAP and IFRS, both are required the businesses to apply accrual concept of
accounting in making financial statements and same for our business. All of our business
transactions are recognized which reflect revenue and expense in the period in which it is
earned and are incurred, respectively by making adjusting entries.

What is adjusting entries? They are journal entries that are recorded at the end of each
accounting period, in order to bring our books into alignment with the accrual basis of
accounting. As a result, Sutherland can ensure that revenue recognition principles and
expense recognition principles are followed.

The purpose of adjusting entries is to assign appropriate portion of revenue and expenses to
the precise accounting period. Some business transactions will affect the revenue and
expenses account more than one accounting period. For example, Sutherland may pay a
portion of advertising expenses or receive the service revenue from its consumers for more
than one accounting periods in advance so that we have to record when each transaction
has been made. Consequently, it ensures that only the relevant revenue and expenses are
reported in the financial statements on time.