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Principles of Accounting
1. Record income and receipts from credit customers, purchases, purchases, expenditures,
and payments to a supplier
2. Prepare adjuted trial balance

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TABLE OF CONTENTS
1. TASK 1.......................................................................................................................................3
1.1 What is adjusting entry?....................................................................................................3
1.2 Why Make Adjusting Entries?..........................................................................................3
1.3 Types of Adjusting Entries...............................................................................................4
1.3.1 Prepaid Expenses.......................................................................................................4
1.3.2 Depreciation Expenses...............................................................................................5
1.3.3 Accrued Expenses......................................................................................................5
1.3.4 Accrued Revenue.......................................................................................................6
1.3.5 Unearned Revenue.....................................................................................................7
2. TASK 2.......................................................................................................................................8
2.1 PART 1-LEDGER ACCOUNTS......................................................................................8
2.1.1 a. Cash Account.........................................................................................................8
2.1.2. b. Capital Account.....................................................................................................9
2.1.3. c. Loans Payable Account..........................................................................................9
2.1.4. d. Accounts Payable Account..................................................................................10
2.1.5. e. Furniture Account................................................................................................10
2.1.6. f. Van Account.........................................................................................................11
2.1.7. g. Accounts Receiveable Account...........................................................................11
2.1.8. h. Sales Account......................................................................................................12
2.1.9. i. Purchases Account................................................................................................12
2.1.10. j. Salaries Account...............................................................................................13
2.1.10. k. Equipment Account..........................................................................................13
2.1.11. l. Rent Account....................................................................................................14
2.2 PART 2-TRIAL BALANCE..........................................................................................15
2.3 PART 3-REFLECTION REPORT.................................................................................16
3. REFERENCES........................................................................................................................17

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1. TASK 1

1.1 What is adjusting entry?

Adjusting entry is a journal entry at the end of an accounting period to bring an asset or

liability account to its proper amount and to update the related expense or revenue

account[ CITATION Ras21 \l 1033 ]. The basic objective of adjusting entries is to ensure that

transactions are recorded in a specific accounting period are adhering to the revenue recognition

and match principles[ CITATION Cli \l 1033 ] as per the requirement of accrual accounting. Thus,

adjusting entries makes sure that the numbers or the transactions that have been already recorded

match up to the correct accounting periods [ CITATION CFI21 \l 1033 ] . Adjusting entries are the 4th

step of the complete accounting cycle. These entries are made in the general ledger accounts

specifically at the end of the accounting period after the preparation of the un-adjusted trial

balance.

1.2 Why Make Adjusting Entries?

The basic objective of adjusting entries is to make sure that the transactions relating to the

activities of a business are recorded accurately in time (Matching concept) and recognize the

revenue only relevant to the current accounting period (Revenue recognition)[CITATION Boo50 \l

1033 ]. Thus adjusting entries affect one nominal account and at least one real account [ CITATION

Boo50 \l 1033 ]. If we don’t make adjusting entries, our books will match those expenses which

have been paid but not yet incurred with the current year's revenue. On the other hand in the

absence of adjusting entries, we will account for the unearned revenue before actually, we can

use the money. Non-posting of adjusting entries will result in inaccurate revenue and expenses

relevant to a specific period and ultimately inaccurate financial statements. Thus, the purpose of

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adjusting entries is to accurately assign revenues and expenses to the accounting period in which

they occurred.

1.3 Types of Adjusting Entries

Following are the types of adjusting entries:

a. Prepaid Expenses
b. Depriciation Expense
c. Accrued Expenses
d. Accrued Revenue
e. Unearned Revenue

1.3.1 Prepaid Expenses

Prepaid expenses are those expenses that are paid in advance but have not yet been
incurred[ CITATION Cli \l 1033 ].
Example:
On 01 December 2021, ABC limited pays two months' rent in advance for its office building
OMR. 40,000/-.
We will make the following journal entries:
Date Account Debit. Credit
OMR OMR
01-Dec-2021 Prepaid Rent 40,000
Cash 40,000

At the end of the month, we will make the following adjusting entry:
Date Account Debit. Credit
OMR OMR
31-Dec-2021 Rent Expense A/C 20,000
Prepaid Rent 40,000

This adjusting entry was to make because rent for the month of January 2022 is not incurred yet,

therefore it is the asset, not the expense.

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1.3.2 Depreciation Expenses

Depreciation expense is a non-cash expense but it is necessary to record it to calculate the book

value of an asset. Therefore, an adjustment for depreciation expense is made at the end of the

accounting period[ CITATION MyA21 \l 1033 ].

Example:
On 01 December 2021, purchased machinery for OMR 10,000, depreciated at the rate of 20%

per annum. ABC limited will pass the following adjusting entry at the end of the accounting

period i.e. 31-Dec-2021-.

We will make the following Adjusting journal entries:

Date Account Debit. Credit

OMR OMR

31-Dec-2021 Depriciation expense (OMR 10,000 167

@10%)/12)
To record the depreciation for Dec 2021

Accumulated Depreciation 167

The depreciation expense account will be debited to the Profit and loss account while the

accumulated depreciation will be shown on the balance sheet reducing the balance of machinery.

1.3.3 Accrued Expenses

Accrued expenses are those expenses that have been incurred but not yet paid. A good example

of accrued expenses is utility expenses where the company first incurs these expense but pay in

the later accounting period. As per accrual accounting principles expenses must be recorded at

the time of their occurrence irrespective of the payment date[CITATION MyA21 \l 1033 ]. Accrued

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expenses are shown as liability in the balance until paid. Adjusting entry of accrued expenses

affect both the balance sheet and income statement.

Example:
On 31 December 2021, salaries for Dec 2021 is OMR 20,000, these salaries were unpaid till 31

Dec 2021.

Date Account Debit. Credit

OMR OMR
31-Dec-2021 Salaries Expense 20,000

Salaries Payable 20,000

We will make the following adjusting journal entry:

1.3.4 Accrued Revenue

This is the revenue that has been earned but not yet collected in cash. In real life, it is a common

example, where half of the work is done in one accounting period and the remaining in the next

accounting period or periods but payment is made after the completion of the task. These

adjusting entries affect both the income statement and balance sheet.

Example:
On 31 December 2021, ABC Limitedhas earned interest on its bank deposit amounting OMR

5,000/- but not received till 31-Dec-2021.

We will make the following adjusting journal entry:

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 Date Account Debit. Credit
OMR OMR
31-Dec-2021 Interest Receiveable 5,000
Interest Revenue 5,000

1.3.5 Unearned Revenue

When a business receives cash in advance before performing the services or delivering the

goods, a liability named unearned revenue is credited. This

Example:
On 01 December 2021, ABC Limited has received amounting OMR 7,000/- against the sales for

which half of the goods are to be delivered on 31-Dec-2021.

We will make the following journal entry at the time of receipt of cash:

Date Account Debit. Credit

OMR OMR
01-Dec-2021 Cash 7,000
Unearned Revenue 5,000

We will make the following adjusting journal entry at the end of the month:

Date Account Debit. Credit

OMR OMR
31-Dec-2021 Unearned Revenue 3,500
Revenue 3,500

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 2. TASK 2
2.1 PART 1-LEDGER ACCOUNTS
2.1.1 a. Cash Account

CASH ACCOUNT
Al-Rushd Company
For the Month ended 31-Dec-2021
Debit (Dr.) Credit (Cr.)
Date Particulars Amount Date Particulars Amount
Omr Omr
01-Dec-2021 Balance b/f 0 05-Dec-2021 By Furniture a/c 15,000

01-Dec-2021 To capital a/c 250,000 12-Dec-2021 By loan Payable 16,000

a/c
03-Dec-2021 To loans Payable 100,000 13-Dec-2021 By Purchases a/c 19,000
a/c
20-Dec-2021 To Accounts 40,000 15-Dec-2021 By Equipment a/c 35,000
Receiveable a/c
25-Dec-2021 To Accounts 10,000 18-Dec-2021 By Rent a/c 3,000
Receiveable a/c
22-Dec-2021 By Accounts 15,000
payable a/c
27-Dec-2021 By Accounts 30,000
payable a/c
30-Dec-2021 By Salaries a/c 3,000
31-Dec-2021 31-Dec-2021 Balance c/f 264,000
Total 400,000 Total 400,000
Ending Cash A/C balance is 264,000 (dr.)

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 2.1.2. b. Capital Account

CAPITAL ACCOUNT
Al-Rushd Company
For the Month ended 31-Dec-2021
Debit (Dr.) Credit (Cr.)
Date Particulars Amount Date Particulars Amount
Omr Omr
01-Dec-2021 Balance b/f 0

01-Dec-2021 By cash a/c 250,000

31-Dec-2021 Balance c/f 250,000
Total 250,000 Total 250,000
Ending Capital A/C balance is 250,000 (Cr.)
2.1.3. c. Loans Payable Account

LOANS PAYABLE ACCOUNT

Al-Rushd Company
For the Month ended 31-Dec-2021
Debit (Dr.) Credit (Cr.)
Date Particulars Amount Date Particulars Amount
Omr Omr
12-Dec-2021 To cash a/c 16,000 01-Dec-2021 Balance b/f 0

31-Dec-2021 Balance c/f 84,000 03-Dec-2021 By cash a/c 100,000

Total 100,000 Total 100,000
Ending Loans payable A/C balance is 84,000 (Cr.)

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 2.1.4. d. Accounts Payable Account

ACCOUNTS PAYABLE ACCOUNT

Al-Rushd Company
For the Month ended 31-Dec-2021
Debit (Dr.) Credit (Cr.)
Date Particulars Amount Date Particulars Amount
Omr Omr
22-Dec-2021 To cash a/c 15,000 01-Dec-2021 Balance b/f 0

27-Dec-2021 To cash a/c 30,000 03-Dec-2021 By van a/c 12,000

11-Dec-2021 By Purchases a/c 45,000
31-Dec-2021 Balance c/f 12,000
Total 57,000 Total 57,000
Ending Accounts Payable A/C balance is 12,000 (Cr.)
2.1.5. e. Furniture Account

FURNITURE ACCOUNT
Al-Rushd Company
For the Month ended 31-Dec-2021
Debit (Dr.) Credit (Cr.)
Date Particulars Amount Date Particulars Amount
Omr Omr
01-Dec-2021 Balance b/f 0 31-Dec-2021 Balance c/f 15,000

05-Dec-2021 To cash a/c 15,000

Total 15,000 Total 15,000
Ending Furniture A/C balance is 15,000 (Dr.)

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 2.1.6. f. Van Account

VAN ACCOUNT
Al-Rushd Company
For the Month ended 31-Dec-2021
Debit (Dr.) Credit (Cr.)
Date Particulars Amount Date Particulars Amount
Omr Omr
01-Dec-2021 Balance b/f 0 31-Dec-2021 Balance c/f 12,000

05-Dec-2021 To Accounts 12,000

payable a/c
Total 12,000 Total 12,000
Ending Van A/C balance is 12,000 (Dr.)
2.1.7. g. Accounts Receiveable Account

ACCOUNTS RECEIVEABLE ACCOUNT

Al-Rushd Company
For the Month ended 31-Dec-2021
Debit (Dr.) Credit (Cr.)
Date Particulars Amount Date Particulars Amount
Omr Omr
01-Dec-2021 Balance b/f 0 20-Dec-2021 By Cash a/c 40,000

09-Dec-2021 To Sales a/c 60,000 25-Dec-2021 By Cash a/c 10,000

31-Dec-2021 Balance c/f 10,000
Total 60,000 Total 60,000
Ending Accounts Receiveable A/C balance is 10,000 (Dr.)

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 2.1.8. h. Sales Account

SALES ACCOUNT
Al-Rushd Company
For the Month ended 31-Dec-2021
Debit (Dr.) Credit (Cr.)
Date Particulars Amount Date Particulars Amount
Omr Omr
31-Dec-2021 Balance c/f 60,000 01-Dec-2021 By balance b/f 0

09-Dec-2021 By Accounts 60,000

receiveable a/c
Total 60,000 Total 60,000
Ending SalesA/C balance is 60,000 (Cr.)
2.1.9. i. Purchases Account

PURCHASES ACCOUNT
Al-Rushd Company
For the Month ended 31-Dec-2021
Debit (Dr.) Credit (Cr.)
Date Particulars Amount Date Particulars Amount
Omr Omr
01-Dec-2021 Balance b/f 0 31-Dec-2021 By balance c/f 64,000

11-Dec-2021 To accounts 45,000

payable a/c
13-Dec-2021 To cash a/c 19,000
Total 64,000 Total 64,000
Ending Purchases A/C balance is 64,000 (Dr.)

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 2.1.10. j. Salaries Account

SALARIES ACCOUNT
Al-Rushd Company
For the Month ended 31-Dec-2021
Debit (Dr.) Credit (Cr.)
Date Particulars Amount Date Particulars Amount
Omr Omr
01-Dec-2021 Balance b/f 0 31-Dec-2021 By balance c/f 5,000

Total 5,000 Total 5,000

Ending Salaries A/C balance is 5,000 (Dr.)
2.1.10. k. Equipment Account

EQUIPMENT ACCOUNT
Al-Rushd Company
For the Month ended 31-Dec-2021
Debit (Dr.) Credit (Cr.)
Date Particulars Amount Date Particulars Amount
Omr Omr
01-Dec-2021 Balance b/f 0 31-Dec-2021 By balance c/f 35,000

15-Dec-2021 To cash a/c 35,000

Total 35,000 Total 35,000

Ending Equipment A/C balance is 35,000 (Dr.)

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 2.1.11. l. Rent Account

RENT ACCOUNT
Al-Rushd Company
For the Month ended 31-Dec-2021
Debit (Dr.) Credit (Cr.)
Date Particulars Amount Date Particulars Amount
Omr Omr
01-Dec-2021 Balance b/f 0 31-Dec-2021 By balance c/f 3,000

18-Dec-2021 To cash a/c 3,000

Total 3,000 Total 3,000

Ending Rent A/C balance is 3,000 (Dr.)

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2.2 PART 2-TRIAL BALANCE

BADOOR PRIVATE SCHOOL

UNADJUSTED TRIAL BALANCE
AS ON 31-DEC-2021
Account Title Debit Balance Credit Balance
OMR OMR
Cash 25,000
Accounts Payable 80,000
Loan Payable 100,000
Prepaid School fees 10,000
Badoor Capital 100,000
Rent Expense 36,000
Insurance Expense 20,000
Security Expense 10,000
Salary Expense 42,000
Utility Expense 20,000
Transportation Expense 120,000
Advertisement Expense 17,000
Totals 290,000 290,000

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2.3 PART 3-REFLECTION REPORT

The fundamental accounting course enabled me to understand not only the types of

transactions involved in running a business but also learn how to summarize these transactions

for the preparation of financial statements. I understand the format of the income statement,

balance sheet, and cash flow statement. Before taking this course, I had the only idea of the

names of these financial statements but this course provided me an opportunity to understand the

principles involved in the preparation of income statements, balance sheets, and cash flow

statements.

This accounting course provided me an opportunity to learn different accounting basic

concepts that I can apply in my future practical life and my own business. This course also

helped me to realize the importance of cash. Accounting profit is based on the accrual accounting

principle. A business may be profitable but might go for insolvency due to the shortage of cash.

By taking this course I understand how to measure cash inflow and outflow from different

business activities like operating, investing, and financing. I can apply this knowledge to my own

business in the future for better cash management.

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 3. REFERENCES

Books Time. (2020). Adjusting Entries. Retrieved from Books Time:

https://www.bookstime.com/articles/adjusting-entries

CFI. (2021). Adjusting Journal Entry. Retrieved from Corporate Finance Institute:
https://corporatefinanceinstitute.com/resources/knowledge/accounting/adjusting-journal-
entry/

Cliffs Notes. (n.d.). Adjusting Entries. Retrieved from CliffsNotes:

https://www.cliffsnotes.com/study-guides/accounting/accounting-principles-
i/adjustments-and-financial-statements/adjusting-entries

Javed, R. (2021). Adjusting Entries. Retrieved from Accounting For management.com:

https://www.accountingformanagement.org/adjusting-entries/

My Accounting Course. (n.d.). Adjusting Entries. Retrieved from My Accounting Course:

https://www.myaccountingcourse.com/accounting-cycle/adjusting-entries

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