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  • Correcting Entry

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    shaun yusingco
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    Here are the key points about adjusting entries: 1. Adjusting entries are journal entries made at the end of an accounting period to allocate expenses and revenues to the proper period. 2. They are needed to follow the matching and revenue recognition principles. Expenses should be matched with the revenues of the period they helped to generate. Revenues should be recognized in the period they are earned, not when cash is received. 3. Common adjusting entries include accruals for unpaid expenses, deferrals for unearned revenues, and depreciation of long-term assets. 4. Adjusting entries ensure the financial statements (income statement and balance sheet) present a true and fair view of the company's financial performance

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    Here are the key points about adjusting entries: 1. Adjusting entries are journal entries made at the end of an accounting period to allocate expenses and revenues to the proper period. 2. They are needed to follow the matching and revenue recognition principles. Expenses should be matched with the revenues of the period they helped to generate. Revenues should be recognized in the period they are earned, not when cash is received. 3. Common adjusting entries include accruals for unpaid expenses, deferrals for unearned revenues, and depreciation of long-term assets. 4. Adjusting entries ensure the financial statements (income statement and balance sheet) present a true and fair view of the company's financial performance

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    © All Rights Reserved
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    4 views12 pages

    Correcting Entry

    Uploaded by

    shaun yusingco
    Here are the key points about adjusting entries: 1. Adjusting entries are journal entries made at the end of an accounting period to allocate expenses and revenues to the proper period. 2. They are needed to follow the matching and revenue recognition principles. Expenses should be matched with the revenues of the period they helped to generate. Revenues should be recognized in the period they are earned, not when cash is received. 3. Common adjusting entries include accruals for unpaid expenses, deferrals for unearned revenues, and depreciation of long-term assets. 4. Adjusting entries ensure the financial statements (income statement and balance sheet) present a true and fair view of the company's financial performance

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
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    of 12

    MISTAKES!!!!

    MYTH: Good accountants don’t

    make mistakes

    TRUTH: Good accountants know


    how to find and repair
    mistakes efficiently
    When an error is discovered in
    the accounting records, it should
    be corrected immediately to
    prevent the processing of wrong
    data which result to unreliable
    financial statements.
    CORRECTING ENTRY

    What is a
    Correcting Entry?
    A correcting entry is a
    journal entry whose
    purpose is to rectify the
    effect of an incorrect
    entry previously made.
    REASONS FOR ACCOUNTING ERRORS

    1. Errors of omission and Commission


    a. Error of Omission – wholly or
    partly omitted in the books

    b. Error of Commission – wrong


    posting of wrong amounts in
    wrong side in accounts
    2. Lack of knowledge

    3. Carelessness

    4. Fraud (intentionally changing / not


    recording / making additional entries)
    STEPS IN MAKING CORRECTING
    ENTRIES:
    1. Determine the Entry Made – what was
    the erroneous / wrong entry made?

    2. Determine the Correct Entry – what


    entry should have been made?
    3. Come up with the Correcting Entry by
    analyzing #1 and #2
    EXAMPLE 1:
    Discovered that cash of PhP20,000.00 deposited
    in the bank was not recorded in the books.
    Entry Made:
    None
    Should-Be Entry:

    Cash in Bank PhP20,000.00


    Cash on Hand PhP20,000.00
    Correcting Entry:

    Cash in Bank PhP20,000.00


    Cash on Hand PhP20,000.00
    EXAMPLE 2:
    Discovered that payment for insurance premium of P5,600.00
    covering one year period was recorded as debit to Prepaid
    Insurance and credit to Accounts Payable, P5,600.00
    Entry Made:
    Prepaid Insurance PhP5,600.00
    Accounts Payable PhP5,600.00
    Should-Be Entry:
    Prepaid Insurance PhP5,600.00
    Cash PhP5,600.00
    Correcting Entry:

    Accounts Payable PhP5,600.00


    Cash PhP5,600.00
    PROBLEM 1:
    Discovered that withdrawal of the owner of
    P45,000.00 was recorded as debit to Drawing and
    credit Accounts Payable, P54,000.00.
    Entry Made:
    Drawing PhP54,000.00
    Accounts Payable PhP54,000.00
    Should-Be Entry:
    Drawing PhP45,000.00
    Cash PhP45,000.00
    Correcting Entry:
    Accounts Payable PhP54,000.00
    Cash PhP45,000.00
    Drawing 9,000.00
    ASSIGNMENT:

    01. What are Adjusting


    Entries?
    02. Why there is a need for
    Adjusting Entries at the end
    of the accounting period?

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