Question

For your main Discussion post, describe at least two typical adjusting entries a service-type business would need to record to bring account balances up-to-date. For your examples, one of the adjusting entries should be an accrual and another a deferral. You may use similar examples as those in your textbook, and you may also research other typical adjusting entries for service-type companies. Be sure to address the following questions:

• What are the purposes of each of your example adjusting entries?
• Why are these adjusting entries required?
• What if the company does not record these adjusting entries? Would financial statements be accurate? Why or why not?
• Should the adjusting entries described be posted to the general ledger before preparing an adjusted trial balance? Why or why not?

Answer 1

• What are the purposes of each of your example adjusting entries?

Adjustment entries are:

- Accrued Expenses

- Depreciation Expenses

These adjustment entry is being made in the books of accounts so that true and fair view of the Financial position of the organisation. It is being adopted as macthing concept will also follow, as all expenses pertaining to the period need to be charged to account.

JOurnal Entry for Accrued Expenses:

for the Salary expenses for which services already being performed by the labour / employees

Salary and Wages A/c Dr

To Accrued Expenses of Salary and Wages A/c / Provision of Salary and Wages A/c

Seconldy for Depreciation:

Same is also charged with the same concept of matching and objective of true an dfair view of financial positions.

If Asset having life of 5 years it means same can be used for 5 years, same required to be charged as asset is used for the 5 years and accordingly expenses shall be charged.

Depreciation for Second Year A/c

To Fixed Assets A/c

Why are these adjusting entries required?

These Adjusting entries is required because as already stated above for true and fair view of the financial statements. As well as to abide the matching concept of the accounting standard and help the stakeholders to take the informed decision about the investment in the company. As it helps to address how much earning has been made against expenses for the year.

What if the company does not record these adjusting entries? Would financial statements be accurate? Why or why not?

If Company doesnot record these financial entries it will not reflect the exact picture of the financial positions of the organisation as suppose one financial year the profit is low and in order to show the profitability position of the organisation they will not adjustment the entries in the books ad accordingy vice versa effect in the next year.

No, financial statement is not accurate because it will not charge all expenses for the period to the books.

Should the adjusting entries described be posted to the general ledger before preparing an adjusted trial balance? Why or why not?

Yes, Becasue the above sentence hold good with the same as Adjusted trial balance is prepared after adjusted journal entries are made and posted to ledger. Becasue adjusting entires are posted at the end of the year. Thats why adjusted trial balance shall be made after adjusted entires is made and posted in trial balance.