Presentation Of Adjustment Accounts

M.com

By

HASSAN ALI

WHAT IS ADJUSTMENT

Prepayment/Advance Payment Advance Revenue Accrued /Due Expenses Accrued Revenue

That transaction which affect two or more accounting period requires adjustment.

Types Of Adjustment

Type Of Adjustment Account

Expenses paid in cash and recorded as asset before they are used or consumedExample Of Prepayment

On 01-11-2010 , Rent paid Rs.6000 for six months01-11-2010

Prepaid Rent A/C 6000 Cash A/C 6000

31-12-2010Rent Expense A/C 2000 Prepaid Expense A/C 2000

Prepayment

Type Of Adjustment AccountAdvance Revenue

Revenue received in cash and recorded as liabilities before they are earned.

Example Of Advance RevenueOn 01-11-2010, Rent receive Rs.6000 for six months.

01-11-2010Cash A/C 6000 Unearned Rent A/C 6000

31-12-2010Unearned Rent A/C 2000 Rent A/C 2000

Type Of Adjustment AccountAccrued Expense

Taken the benefits but not yet paid in cash.

Example Of Accrued/Due ExpenseSalaries Rs.8000 due for the month of December 2010 but not paid yet.

Salaries Expense A/C 8000 Salary Payment A/C 8000

Type Of Adjustment AccountAccrued Revenue

Revenue earned but not yet received.

Example Of Accrued RevenueOn 31-12-2010, Legal fee Rs.7000 has been earned but not yet receive.

Legal Fee Receivable A/C 7000 Legal Fee Revenue A/C 7000

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