Adjusting entries at work

Adjusting entries are accounting journal entries that convert a company’s accounting records to the accrual basis of accounting.

An adjusting journal entry is typically made just prior to issuing a company’s financial statements, at the end of the accounting period.

Some examples

During the accounting period 1.1.2018 – 31.12.2018, the company XYZ Inc. a computer retail company, deals with the following transactions:

1. Purchase 15 computers for 45.000 (on 1.1.2018)
2. Sell and deliver 5 computers for 25.000 (on 1.6.2018). Clients pay in 60 days.
3. Sell and deliver 5 computers for 50.000 (on 15.10.2018). Clients pay 90 days.
4. Rent office space on 1.1.2018. The property owner required 18 months rent paid in advance. Monthly rent is1.500.
5. Buy company car for 40.000 – expected useful life 5 years with residual value 15.000.
6. Buy a software license for 12.000 that will expire in 3 years.