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Accounting Adjustments Guide

This document discusses several accounting concepts and procedures: 1) Adjusting/closing entries are made to transfer account balances from the income statement to the income summary account, with debits and credits depending on if the account has a positive or negative effect. 2) The balance of the income summary account indicates if there was a profit or loss for the period. Any credit balance transfers to retained earnings. 3) A petty cash fund is a reserved cash amount for small business expenses. At the end of each period, cash over/short is determined from the account. 4) Bank reconciliation involves analyzing differences between the book and bank statement cash balances, reconciling items like outstanding checks, fees, and deposits

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50 views3 pages

Accounting Adjustments Guide

This document discusses several accounting concepts and procedures: 1) Adjusting/closing entries are made to transfer account balances from the income statement to the income summary account, with debits and credits depending on if the account has a positive or negative effect. 2) The balance of the income summary account indicates if there was a profit or loss for the period. Any credit balance transfers to retained earnings. 3) A petty cash fund is a reserved cash amount for small business expenses. At the end of each period, cash over/short is determined from the account. 4) Bank reconciliation involves analyzing differences between the book and bank statement cash balances, reconciling items like outstanding checks, fees, and deposits

Uploaded by

Alisha Khan
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Adjusted Entries

(Closing/adjusting entries of income statement)


‘’Each account process in the income statement either shall be close or shall be
adjusted to income summary account’’

INCOME SUMMARY A/C

The account being close for adjusted or close having a positive effect , income
summary credited and that account debited vice versa, are after all necessary entries
are posted in the income summary account. The balance of this account shall be
determined, if account shows a debit balance, the loss of the business is indicated and
vice versa.

In case of credit balance in the income summary account the retained earnings/capital
shall be credited and income summary account shall be debited.

Assumption to Close Income Summary With a debit Balance into


(loss)
1. If current Dr is lesser than the previous balance of the retained
earnings.
2. Current loss Dr is greater than the previous balance of the
retained earnings.
3. If there is no, any balance of retained earnings.

PETTYCASH FUND (current asset account)


Petty cash fund is reserved amount establish by the firm, exclusively, to meet day to
day small expenses during in the business.
OPERATING PROCEDURE. This is depending of the firm management, basically for
the one month PCF is a current assets.
after all necessary entries are posted in the account cash over and short , be
determined at the end of accounting period, if this account shows indicate cr
balance the revenues are non operating is shown and vice versa.
Bank Reconciliation
An analysis explaining the difference between an enterprise, s book balance of cash
and its bank statement balance.
RECONCILING ITEMS.
1. Outstanding checks. These are checks that have been drown by the depositor
and deducted on the depositors records but have not reached the bank for
payment and deduction.
2. Debit memorandum. NSF, services charges, zakat deduction etc.
3. Credit memorandum. Collection of notes, earning of interest, deposit.
4. errors
5. Deposit in transit deposits (extreme entries)

Doubtful Debit
The debit balance of account shall be added current estimation of allounce for
doubtful debit to record the adjusting entry at the end of period and vice versa.

ASSUMPATION TO WRITE OFF THE ACCOUNTS

1. To write off the account of customer assumption to record the entries


connection to uncollectivable to doubtful debit.
2. To collect the account of customer previously written off.
3. Partial collection of account , remaining to write off.
After all necessaries are posted in the account of allounce of doubtful debt, the
balance of this account shall be determined at the end of accounting period. If this
account indicates of debit balance, over charging of the allounce is shown and vice
versa.

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