YEAR END ADJUSTMENTS
We as certified tax accountants can assist you in keeping track of your accruals and prepayments, to secure your expectations for future payments and keep you aware of those payments that have already made. To avoid over payment or missing an important expense payment, this is critical, and we will always keep your expenses and revenues recorded to prevent any instances of this and to make adjustments where needed.
Year end adjustments to the accounts are done after reconciling all nominal ledgers and raising journals to transfer correct figures to their respective nominal ledgers. These adjustments can have a big effect on the net profit and tax liability at the end of year. Normally small and medium sized business will do adjustments to their monthly management accounts in order to keep up to date with financial position of business. Adjustment done to financial accounts are different to those done to management accounts.
YEAR END ADJUSTMENTS TO LOOK FOR
There are five types of adjusting entries:
- Accrued revenues – when a service is performed for a customer in a particular month but then the service is not billed until the following month you would need to debit accounts receivable and then credit service revenue.
- Accrued expenses – one example of this is wages that are paid out to employees, and adjustments would need to be made debiting the wages expense and crediting the wages payable.
- Unearned revenues – these refer to any payments for goods or services which will be received or performed at a future time. The adjusting entry will debit unearned revenue and credit revenue.
- Prepaid expenses – these are assets which have been paid for and are then gradually used over the accounting period e.g. office supplies. The adjusting entry debits the office supply expenses and credits prepaid office supplies.
- Depreciation – this process allocates the cost of a particular asset over its economic lifespan
Advice for Adjustments
Making adjustments to entries in accounting journeys when an accounting period comes to an end may not be as simple as it seems. It is important to adjust expenses and revenues to the accounting period during which they occurred before posting them to the general ledger. When recording accounting journal transactions under an accrual system, items will be entered in real time which means that the entry may appear before the time that the money actually changed hands. The point of adjusting entries is therefore to record the date on which the money was actually paid.
Handling year end adjustments can be a complex process, and can also be quite time consuming. The Accountancy Solutions has the skills and experience necessary to perform this task on your behalf to save you time and effort and also to ensure that there are no mistakes made during this complicated task.