1) What is a trial balance, why do we create it? 2) What are adjustment journal...

1) What is a trial balance, why do we create it?

2) What are adjustment journal entries? Why do we record the adjustment journal entries?

3) What is the purpose of writing an adjusted Trial balance?

4) How adjustment journal entries are different from the closing journal entries?

Expert Solution

1) What is a trial balance, why do we create it?

Trial balance is a collection of open ledger balances with debit and credit columns for showing ledger closing balances for reconciliation and verification of double entry accounting system that all accounting entries have been posted correctly and no error are crept in.

2) What are adjustment journal entries? Why do we record the adjustment journal entries?

Adjustment journal entries are adjustment of assets and liabilities accounts to make a respective charge in the period of their occurrence or expiry, like prepaid rent is adjusted for expiry of rental paid, interest earned on investment is recorded on accrual basis for the earned interest income, its necessary for matching principal of recognition of income or expenses in the period its incurred.

3) What is the purpose of writing an adjusted Trial balance?

The purpose of adjusted trial balance is to verify that total debit of ledger is equal to total credit of ledger balance after the adjusting entries have been posted.

4) How adjustment journal entries are different from the closing journal entries?

Adjustment journal entries are different in nature than closing journal entries, since adjusting entries are passed to account for income or expenses and closing entries are passed to close the balance in income or expense accounts to income summary and closing of final balance to retained earnings or owners capital balance.

ekkarill92 answered 1 year ago

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