In this article, we’ll go over 40 important adjusting entries that will help you understand them better.
Before we start, please read the following article: Adjusting entries-Definition, Examples, Types, Necessity, etc.
It will help you understand how to make adjusting entries for various transactions and will clear up any confusion you may have about them.
So let’s get started.
Adjusting Entries for Business Transactions
The 40 important adjusting entries are as follows:
1. Adjusting entries for outstanding or accrued expenses:
a. For outstanding or accrued salary expenses.
Salary Expenses A/C———-Dr.
Salaries Payable A/C—-Cr.
b. For outstanding or accrued rent expenses:
Rent Expenses A/C———-Dr.
Rent Payable A/C——-Cr.
c. For outstanding or accrued payroll expenses:
Payroll Expenses A/C——–Dr.
Payroll Payable A/C——Cr.
2. Adjusting entries for prepaid expenses or prepayments:
I. Prepaid expenses are initially recorded as assets have been used:
a. Adjusting entry for prepaid rent (expired portion)
Rent Expenses A/C ——- Dr.
Prepaid Rent A/C—-Cr.
b. Adjusting entry for prepaid insurance (expired portion)
Insurance Expenses A/C—Dr.
Prepaid Insurance A/C–Cr.
c. Adjusting entry for prepaid general expenses (expired portion)
General Expenses A/C————-Dr.
Prepaid Gen. Expenses A/C—Cr.
II. Prepaid expenses are initially recorded as expenses that have not been used:
a. For insurance expenses
Prepaid Insurance A/C———Dr.
Insurance Expenses A/C—-Cr.
b. For rent expenses
Prepaid Rent A/C————Dr.
Rent Expenses A/C——-Cr.
3. Adjusting entry for supplies
Supplies are initially treated as assets.
a. Supplies (used portion)
Supplies expense A/C——Dr.
Supplies A/C————Cr.
b. Office Supplies (used portion)
Off. Supplies Expenses A/C—-Dr.
Office Supplies A/C———Cr.
4. Adjusting entries for unearned revenues:
- Unearned revenues are initially recorded as liabilities but are now recognized as revenue:
a. Adjusting entry for unearned service revenue (service performed)
Unearned Service Revenue A/C –Dr.
Service Revenue A/C————Cr.
b. Adjusting entry for unearned rent revenue (expired portion)
Unearned Rent Revenue A/C—-Dr.
Rent Revenue A/C ————–Cr.
c. Adjusting entry for unearned other revenue (expired portion)
Unearned Other Revenue A/C —-Dr.
Other Revenue A/C —————Cr.
- Unearned Revenues initially recorded as revenue are still unearned:
a. For service revenue
Service Revenue A/C ——————–Dr.
Unearned Service Revenue A/C –Cr.
b. For rent revenue
Rent Revenue A/C ——————–Dr.
Unearned Rent Revenue A/C —Cr.
c. For other revenue
Other Revenue A/C ——————–Dr.
Unearned Other Revenue A/C —-Cr.
5. Adjusting entries for accrued revenues
a. Adjusting entry for accrued service revenue:
Accounts Receivable A/C——Dr.
Service Revenue A/C——-Cr.
b. Adjusting entry for accrued interest revenue
Interest Receivable A/C ——–Dr.
Interest Revenue A/C—Cr.
c. Adjusting entry for accrued rent revenue:
Rent Receivable A/C——Dr.
Rent Revenue A/C—–Cr.
6. Adjusting entry for allowance for un-collectible/doubtful accounts
a. Write off method
Bad Debts Expenses A/C——- Dr.
Account Receivables A/C—-Cr.
b. Allowance method
Bad Debts Expenses A/C—– Dr.
Allowance for Doubtful A/C–Cr.
c. Written off allowance for doubtful account
Allowance for doubtful A/C—-Dr.
Account Receivables A/C—Cr.
7. Adjusting entry for bad debts recovered
i. Account Receivables A/C——- Dr.
Allowance for Doubtful A/C–Cr.
ii. Cash A/C—————————— Dr.
Account Receivables A/C—-Cr.
8. Adjusting entry for depreciation of an asset
a. Depreciation on equipment
Depreciation Expenses A/C——————- Dr.
Accumulated Dep.–Equipment A/C–Cr.
b. Depreciation on Furniture
Depreciation Expenses A/C—————– Dr.
Accumulated dep.-Furniture A/C —Cr.
9. Adjusting entry for deposited cheque dishonored
Account Receivables A/C— Dr.
Bank A/C——————— Cr.
10. Adjusting entry for interest on capital
Interest Expenses A/C—- Dr.
Capital A/C ————— Cr.
11. Adjusting entry for interest on drawing
Capital/Drawing A/C ———– Dr.
Interest Income A/C—-Cr.
12. Adjusting entry for ending inventory (perpetual inventory system)
(a) If the actual value is higher than the book value, then the entry for the difference will be
Inventory A/C —————– Dr.
Cost of goods sold A/C —Cr.
(b) If the actual value is less than the book value, then the entry for the difference will be
Cost of goods sold A/C —Dr.
Inventory A/C ————- Cr.
13. Adjusting entry for supplies included in closing stock.
a. Closing Stock A/C—————- Dr.
Cost of Goods Sold A/C — Cr.
b. Supplies A/C———————Dr.
Supplies Expense A/C—Cr.
14. Adjusting entry for unrecorded purchase
Purchase A/C ——————Dr.
Account Payables A/C—Cr.
15. Adjusting entry for unrecorded sales
Account Receivables A/C—-Dr.
Sales A/C ——————— Cr.
16. Adjusting entry for goods distributed as a sample
Advertising Expenses A/C————–Dr.
Cost of goods Sold/Purchase A/C-Cr.
17. Adjusting entry for goods sold without profit
Sales A/C —————- Dr.
Purchase A/C ——- Cr.
18. Adjusting entry for un-recorded purchase of the machine
Machinery A/C —————- Dr.
Accounts payable A/C—Cr.
19. Adjusting entry for goods sold but not delivered
No. Entry
20. Adjusting entry for income tax provision
Income tax expense A/C—- Dr.
Income tax payable A/C–Cr.
21. Adjusting entry for goods sold but not delivered and included in ending inventory
Income summary A/C—— Dr.
Ending inventory A/C—- Cr.
22. Adjusting entry for installation of machinery included in wages
Machinery A/C ————— Dr.
Wages expense A/C—Cr.
23. Adjusting entry for repairs expense included in machinery
Repair Expenses A/C—- Dr.
Machinery A/C———- Cr.
24. Adjusting entry for set off the account receivable against accounts payable
Account Payables A/C———- Dr.
Account Receivables A/C–Cr.
25. Adjusting entry for service provided but not billed.
Accounts Receivable A/C— Dr.
Service Revenue A/C—— Cr.
26. Adjusting entry for accrued interest on investment
Interest Receivable A/C—–Dr.
Interest Revenue A/C——Cr.
27. Adjusting entry for accrued Interest on loan or mortgage or notes payable
Interest Expenses A/C—-Dr.
Interest Payable A/C—–Cr.
28. Adjusting entry for discount or allowance for accounts Receivable
Discount Expenses A/C ——– Dr.
Accounts Receivable A/C—Cr.
29. Adjusting entry for interest earned but not received
Interest Receivable A/C ——– Dr.
Interest Revenue A/C——- Cr.
30. Adjusting entries for cash paid in by the proprietor, including in sales.
Sales A/C ————– Dr.
Capital A/C ——– Cr.
31. Adjusting entry for goods destroyed by fire and the insurance company admitted the claim partially.
Insurance Claim Receivable A/C– Dr.
Loss by fire A/C————————- Dr.
Cost of Goods Sold A/C———- Cr.
32. Adjusting entries for goods sent on a sale or return basis, the confirmation has not yet been received.
a. Sales A/C ———————–Dr.
Account Receivables A/C–Cr.
b. Merchandise Inventory A/C—Dr.
Cost of goods sold A/C——— Cr.
33. Adjusting entry for bank interest on deposit
Bank A/C——————– Dr.
Interest Income A/C – Cr.
34. Adjusting entry for Deferred Advertisement
Deferred advertisement A/C ———- Dr.
Advertisement Expenses A/C—Cr.
35. Adjusting entry for Discount on account receivable
Discount Expenses A/C———————————————–Dr.
Allowance for a discount on account receivable A/C — Cr.
36. Adjusting entry for goodwill written off
Amortization A/C —– Dr.
Goodwill A/C ——- Cr.
37. Adjusting entry for proposed dividend
Dividend expenses A/C ——- Dr.
Dividend payable A/C—–Cr.
38. Adjusting entry for Vat included in Purchase
VAT Current A/C—–Dr.
Purchase A/C——Cr.
39. Adjusting entry for Office supplies included in the Beginning inventory
a. Income Summary A/C—Dr.
Opening Stock A/C—Cr.
b. Office Supplies A/C———-Dr.
Supplies Expense A/C—Cr.
40. Adjusting entry for valueless cheque included in Cash
Mislenous Loss A/C——Dr.
Cash A/C —————- Cr.
I hope you now have a clear understanding of how to make adjusting entries for various transactions after reading this article.
Please let us know if you need the adjusting entry for any other transactions not listed above by leaving a comment below.
You can also read:
