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Adjusting entries at work
Adjusting entries are accounting journal entries that convert a company's accounting records to the accrual basis of accounting.
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:
- Purchase 15 computers for 45.000 (on 1.1.2018)
- Sell and deliver 5 computers for 25.000 (on 1.6.2018). Clients pay in 60 days.
- Sell and deliver 5 computers for 50.000 (on 15.10.2018). Clients pay 90 days.
- Rent office space on 1.1.2018. The property owner required 18 months rent paid in advance. Monthly rent is1.500.
- Buy company car for 40.000 – expected useful life 5 years with residual value 15.000.
- Buy a software license for 12.000 that will expire in 3 years.
