Adjusting

Entries
BY: DONNA ZANDUETA-TUMALA, CPA
 At the end of discussion, you were be able to:
Learning  Define Adjusting Entries

Objectives  Explain the reasons for adjusting entries

 Identify the major types of adjusting entries.
 Prepare adjusting entries
What is Adjusting Entries?

journal entries made at the end of

accounting period before closing period to
have an updated balances of asset, liability,
revenue and expense accounts to ensure
their balances are accurate and ready for the
preparation of financial statements.
Importance of Adjusting Entries

The very purpose of adjusting entries is to communicate an accurate picture

of the company’s finances.

The management can have a complete look into the financial statements
knowing that everything that occurred during the month is reported even if
the financial part of the transaction would have warranted to have occurred at
a later stage.

A statement of finance prepared without considering adjusting entries would

misrepresent the financial health of the company.
Adjusting Entries Adhere to

Freedom from
Completeness Timeliness
error

Revenue Matching
Accrual Basis
Recognition Principle
 Prepaid Deferred
Expenses Revenue

Types of
Adjusting Accrued Accrued
Revenue Expenses
Entries

Asset Uncollectible
Depreciation Accounts
 At the end of discussion, you were be able to:
Learning  Define Adjusting Entries

Objectives  Explain the reasons for adjusting entries

 Identify the major types of adjusting entries.
 Prepare adjusting entries
Prepaid Expense – Adjusting Entries

Sample Problem 1

On August 1, 2021, Buching Company purchased office supplies amounting to 80,000 in which the company paid in cash. On December 31,
2021, inventory record shows that the remaining office supplies amounts to 30,000

Asset Method Expense Method

August 1, 2021 August 1, 2021

Office Supplies 80,000 Office Supplies Expense 80,000
Cash 80,000 Cash 80,000

December 31, 2021 December 31, 2021

Office Supplies Expense 50,000 Office Supplies 30,000
Office Supplies 50,000 Office Supplies Expense 30,000