[MelMH]

Hi all,

I'm really confused with adjusting entries and really weak in this.

Trail Balance
Salesman's comm dr 5300.00

Additional info given was: the amt of salesman's comm owing at the last date of financial period was 700.00.

Advise on the adjustment on this... thanks

[morgaine300]

That's an accrued expense. All adjusting entries fit into a "type." If you can learn the types and see that they are essentially alike, it's easier to do other ones of the same type.

An accrual is when something has already "happened" but the money has not been paid yet. That is, an accrued revenue is when the revenue is already earned but you haven't received payment, and an accrued expense is when the expense is already incurred buy you have not made payment. You've been making entries like this all along, but they likely have not been referred to by these names. Every time you use a receivable or payable, it's an accrual.

If the saleman's commission was already incurred by the company (i.e. they already earned it and therefore you owe it), then you have incurred that expense. Which is amounting to $700 worth. But you have not paid it yet, because presumably it's paid on some set date/day, which will fall into the next accounting period.

So you have to recognize the expense of the commission. ("Recognize" means record it so that it's showing up in the records.) And everything you owe but haven't paid goes into some type of payable. Accounts payable is for your everyday vendors and suppliers and such. Things like salaries, commissions, interest, taxes, etc. should have their own payable accounts -- match it to the expense account name. e.g. Wages Expense, Wages Payable
Interest Expense, Interest Payable
Income Tax Expense, Income Tax Payable
Calling it by whatever it happens to be. (This may be something like Salaries & Commissions Expense.)

ALL accrued expenses work this way.

[MelMH]

That's an accrued expense. All adjusting entries fit into a "type." If you can learn the types and see that they are essentially alike, it's easier to do other ones of the same type.

An accrual is when something has already "happened" but the money has not been paid yet. That is, an accrued revenue is when the revenue is already earned but you haven't received payment, and an accrued expense is when the expense is already incurred buy you have not made payment. You've been making entries like this all along, but they likely have not been referred to by these names. Every time you use a receivable or payable, it's an accrual.

If the saleman's commission was already incurred by the company (i.e. they already earned it and therefore you owe it), then you have incurred that expense. Which is amounting to $700 worth. But you have not paid it yet, because presumably it's paid on some set date/day, which will fall into the next accounting period.

So you have to recognize the expense of the commission. ("Recognize" means record it so that it's showing up in the records.) And everything you owe but haven't paid goes into some type of payable. Accounts payable is for your everyday vendors and suppliers and such. Things like salaries, commissions, interest, taxes, etc. should have their own payable accounts -- match it to the expense account name. e.g. Wages Expense, Wages Payable
Interest Expense, Interest Payable
Income Tax Expense, Income Tax Payable
calling it by whatever it happens to be. (This may be something like Salaries & Commissions Expense.)

ALL accrued expenses work this way.

Hey, thanks a lot. Have a nice day.

[morgaine300]

You're welcome. You too. :-)