ADJUSTING

JOURNAL
ENTRIES
Adjusting • Adjusting Journal Entries are
Journal entries used to update the
accounts prior to the preparation
Entries of Financial Statements
 Reasons The accounts affect more than
one accounting period.
for
Adjusting The accounts affected are
Journal adjusted so there would be no
overstatement or
Entries understatement of balance sheet
items and income statement
items
Adjusting Journal Entries
• Prepayments
• Unearned Revenue
• Accrued Income
• Bad Debts/Doubtful Accounts
• Depreciation Expense
 PREPAYMENTS
expenses already paid but not yet incurred or used.
 Prepaid Rent
PREPAYMEN
TS
Prepaid Insurance

Supplies
UNEARNED OR
DEFERRED
INCOME
Income already received but not yet earned
 ACCRUED EXPENSES

Expenses already incurred or used but not yet paid

 ACCRUED
INCOME
Income already earned but not yet received
 BAD DEBTS/
DOUBTFUL ACCOUNTS

Losses due to uncollected accounts

 DEPRECIATION
EXPENSE
Allocation of plant asset cost over its useful life