Adjustment Journal, Crucial Matters in the Process of Making Financial Statements
Accounting does have an important role in the sustainability of a company or line of business. Responsible for ensuring the company has taken care of all financial journal needs. Like taxation and financial statements, the accounting profession really shouldn’t be underestimated. If you need a qualified accountant for your company, you can get one at lokalerevisorer.dk.
The reason is, if an accountant makes a miscalculation or is wrong in entering financial data, the final results of the financial statements will surely be inaccurate and become not credible. It also does not rule out the possibility that the errors in the contents of financial statements can make the company’s performance is not optimal.
For this reason, the credibility of a financial statement is always maintained and accurate, accounting employees are required to prepare to adjust entries when preparing financial statements. This adjusting journal entry is generally carried out when the financial statements have all the data and information to be reported.
That way, all of the data can be checked in full and can be revised if there are errors. Having a very important function, the preparation of adjusting entries is one thing that must be done by accountants in the process of making financial reports. For this, you must understand what the adjusting journal is and how to record it in the adjusting journal.
Account Types in Ledgers Requiring Adjustments
There are several accounts in the financial statements or ledgers that make adjusting entries need to be prepared at the manufacturing stage. Each of these accounts has a varied background that requires an accountant to prepare an adjusting entry. Here is the explanation.
The first account that requires an adjusting entry is the equipment account. The adjusting entry needs to be compiled in the equipment account because there is a usage report on the account. The equipment referred to in this account is materials or goods purchased for the company’s operations.
Adjustments to the income account need to be done because there is revenue that still hasn’t been calculated. An adjusting entry is also required for this account because there are receipts that may not yet be the company’s profit, such as revenue receivables. The nominal money or income that will still be received and has become the right of the company is what needs to be adjusted in the adjusting entry.
An adjusting entry needs to be made in the expense account because there are expenses that still have not yet been calculated or paid for. An example is an outstanding expense, which is an expense that still needs to be paid by the company.
Initial Revenue Accounts Received
Adjustments to income accounts received at the outset need to be done because generally this income is not allowed to be recorded as an income. Usually, the income received at the beginning is recorded as debt because it is still considered not the right of the company.
Initial Expense Accounts
Adjustments need to be made to the expense account that is paid at the beginning because it is not uncommon for companies to pay bills or expenses in advance. That way, the accountant needs to calculate the number of expenses that need to be reported in the relevant financial statement period. So, adjusting entries need to be made on this type of account, according to the end of the period.
Fixed Asset Account
Journal adjustments need to be made to the fixed assets account because this account often depreciates. So, the reduction in the value of a fixed asset owned by a company needs to be recalculated by an accountant. Fixed assets are all assets in the form of objects or rights controlled by the company, the use of which exceeds one accounting period. Examples of these fixed assets are buildings, machinery, vehicles, etc. whose asset values always decrease over time.
After all types of accounts that require these adjustments have been re-recorded in the adjusting entries, you certainly need to ensure that the information in the entries is accurate. One way you can do to ensure that all adjustments to the adjusting entries have been made is to compare them with the adjusting entries in the previous period. So, you can get an overview of data and information that often has to be adjusted from each account that requires these adjustments.