ACC 502 Week 2 Discussion 1
The term “adjusting entries” refers to a very important step in the
accounting cycle. Explain when, why, and how the adjusting
process is used. Provide an example to clarify your statements.
, Adjusted entries are performed at the end of an accounting period
(month, quarter, or year) in order to update the accounts of the
actual net income losses and revenues, as well as the company’s
assets and liabilities that occurred within that time period. In
accrual-based accounting trial balances may not reflect actual
balances due to expenses and revenues not yet being journalized
and posted, especially when dealing with accruals (accrued
expenses and accrued revenues) and deferrals (prepaid expenses
and unearned revenues). Adjusted entries are recorded in an
adjusted trial balance. It is helpful to start with a worksheet that
identifies which accounts need adjustments (those with accruals
and deferrals) and summarizes that data in order to prepare the
financial statements.
An unadjusted trial balance can affect the company’s ledger
accounts because they could report inaccurate balances, which
can be overstated or understated. An example of this is the salary
expense account. Bank loans with interest rates are an accrued
expense because companies do not paying the entire loan
amount in full and will instead make periodic payment on it, which
will incur interest. In order for the liabilities and expenses to show
correctly, the interest must be recorded when it is actually paid.
For that period, the balance on the Interest Payable account must
reflect the balance on the Interest Expense account. In other
words, a credit will appear under liabilities (Interest Payable), and
a debit will appear under expenses (Interest Expense).
Nobles, T., Mattison, B., & Matsumara, E. (2014). Horngren’s accounting, the
financial chapters (10 edition). Retrieved from
https://viewer.gcu.edu/FXW8XB
The term “adjusting entries” refers to a very important step in the
accounting cycle. Explain when, why, and how the adjusting
process is used. Provide an example to clarify your statements.
, Adjusted entries are performed at the end of an accounting period
(month, quarter, or year) in order to update the accounts of the
actual net income losses and revenues, as well as the company’s
assets and liabilities that occurred within that time period. In
accrual-based accounting trial balances may not reflect actual
balances due to expenses and revenues not yet being journalized
and posted, especially when dealing with accruals (accrued
expenses and accrued revenues) and deferrals (prepaid expenses
and unearned revenues). Adjusted entries are recorded in an
adjusted trial balance. It is helpful to start with a worksheet that
identifies which accounts need adjustments (those with accruals
and deferrals) and summarizes that data in order to prepare the
financial statements.
An unadjusted trial balance can affect the company’s ledger
accounts because they could report inaccurate balances, which
can be overstated or understated. An example of this is the salary
expense account. Bank loans with interest rates are an accrued
expense because companies do not paying the entire loan
amount in full and will instead make periodic payment on it, which
will incur interest. In order for the liabilities and expenses to show
correctly, the interest must be recorded when it is actually paid.
For that period, the balance on the Interest Payable account must
reflect the balance on the Interest Expense account. In other
words, a credit will appear under liabilities (Interest Payable), and
a debit will appear under expenses (Interest Expense).
Nobles, T., Mattison, B., & Matsumara, E. (2014). Horngren’s accounting, the
financial chapters (10 edition). Retrieved from
https://viewer.gcu.edu/FXW8XB
