Adjusting Entries – Adjusting Entry Example 1

Step 15, here we will be talking about period and adjusting entries all period and adjustments remind a certain data which was not recorded during the accounted period.  The data usually might be related to the previous periods of it was just not known during the accounting period when the transactions were recorded in the general journal and we must record this financial data since it has an impact on the financial position of the business and in order to record this data correctly we need to make adjusting entries so this is done by posting, by recording adjusting entries and then posting them to the general ledger accounts.

 

And examples of the information which will be recorded in the form of the adjusting countries in depreciation of the assets which were acquired in prior periods it is recording for the consumption of inventory which was acquired earlier.  It is additional expenses for which we receive invoices at the end of accounting period.  Also explains his life labor cost utilities and such expenses we might become known only a 300 accounting period.  In order to understand how those interest are made again we will be using our company Zeta and comprehensive exam and here is an additional information for that company and this information became known at the end of the accounting period.

 

So we know that office space which was acquired by Zeta has useful period of 90 years.  We now that salary is for February where $800 and part of them was paid at the end of February and remaining will be paid in March.  Also during February office stationary around the cost of which was $240 worth used in activities of Zeta and Zeta received an invoice for utilities expenses for February and amount is $190 and this amount will be paid not in February but in March.

 

The next what we do we will record the adjusting countries which we will cover this information and we will start from the usual life of office space and we will calculate depreciation for office space.  Since office space is a longer term of plant asset which is not included into the expenses when it was acquired but it is accounted in the balances sheet and it is accounted as asset.  We will gradually include this cost into the income statement or into the expenses.

 

And here we will be calculating that amount which is gradually included into the expenses.  We have cost of office space.  We calculate useful life in months since we need a monthly amount for February and we deduct, we divide cost of office space by total quantity of months which are included into the useful of use at your office space and we have monthly depreciation amount.

 

This depreciation amount will be posted to the expense account and this done by the following entry.  We have general journal and we have an increase in depreciation expenses is debit on depreciation expenses account $65 and we have decrease in assets.  We use not asset account but we use separate accumulated depreciation account which is contrary to the asset account and we credit this account by the monthly depreciation amount.

 

And this just posting the other transactions he will also include the description of the transaction.  This is a way how the adjusting entry is made so nothing new here since it is recording has done in the same as we record any transaction during the accounting period.  The difference is only this that will do it by making interest to the general journal only after travel balance was already prepared and the next step is to post information into the ledger accounts.

 

We have depreciation expenses and we post that amount to the depreciation expenses account and you se that the reference show the transaction is a1 so this means that this is suggesting entry number one and this is required in order to track how this transaction was recorded and when it was recorded and on the other side we have accumulated depreciation account and the post the entry to the credit side of that account.

 

So this was the first adjusting entry we need and in the next video we will continue with the other additional information and recording it in the full move adjusting interest.

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