[smokedetector]

Is this right?


The following are accounts that might be related to an adjusting entry:

Account --Deferral/Accrual --Related Income statement acct

Accrued interests and accounts receivable --Accrual --Interest income
Allowance for loan losses --Accrual --Accounts Receivable
Premises and Equipment --Deferral --Prem. & Equip. exp.
A/P, accrued expense and other liabilities --Accrual --Interest expense

[Criado]

I am not sure if I understand the question correctly but here are some of my comments.

Accrued interests and accounts receivable --Accrual --Interest income
=> I think Interest receivable should be used other than Accrued interests and accounts receivable

Allowance for loan losses --Accrual --Accounts Receivable
=> this cannot be classified as accrual nor deferral

Premises and Equipment --Deferral --Prem. & Equip. exp.
=> The account should be Accumulated Depreciation-Prem. & Equip not Premises and Equipment; Prem. & Equip. exp should be Depreciation Expense-Prem. & Equip.

A/P, accrued expense and other liabilities --Accrual --Interest expense
=>Expense Accounts instead of Interest expense

I hope this helps :)

[smokedetector]

Sorry, I don't suppose I explained my question too well. I had to look at the financial statements of JPMorgan Chase, pick 4 accounts that could have been adjusting entries accounts, say whether they were accruals or deferrals and name an income statement account that could be related. The names are just what was on the financial statements, but I wasn't sure if I paired them up right, was right about accrual/deferral, or even picked adjusting entries to begin with. I don't really understand the concept of adjusting entries. I understand why you have to do it, such as using half of your prepaid rent and having to account for that, but I don't understand how you pick the other account to adjust or why it's called adjusting when you do it when you do the financial statements, not after you do them all and then go back and adjust it. Anyway thanks for the response.

[Criado]

Usually, pairing is standard.

If you saw a prepaid rent, the pair is rent expense (deferral)
If you saw accumulated depreciation, the pair is depreciation expense (deferral)
If you saw wage payable, the apir is wage expense. (accrual)
If you saw unearned revenue, the pair is revenue (deferral)
If you saw interest receivable, the pair is interest revenue. (accrual)
Sometimes, but not always, accounts receivable is also paired with revenue (accrual)

[Criado]

I missed another of your query.

In lay man's term, it is called adjustment because we need to adjust certain account because it is no longer what it is.

Assume that Supplies as of Jan 1, 2008 is $800. On December 31, 2008, the supplies on hand after counting it is $200.

Notice that what is reflected on the book is still $800 but in reality it's only $200. Thus, we need to adjust.

Because we only have $200, this means we used (expensed out) $600 worth. So, to adjust the account we debit. Supplies Expense $600and Credit. Supplies $600.

[smokedetector]

Ah well I have to spread the rep around it seems, but that explained what I wasn't understanding. It seems kind of simple now... lol. Thank you!

[Criado]

You're welcome :)