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Purpose of adjustment entries?

shwetha (CWA learner) (447 Points)

04 September 2011

what is the main purpose of adjusting and why we need to post it twice everytime.????????????????

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10 Replies

ashish gupta ( student) (1922 Points)
Replied 05 September 2011

Adjustments are done to rectify some mistakes by ommission in the accounts. Every entry affects two a/cs thas why it is posted twice.

I hope i understood your query in the sense you intended

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shwetha (CWA learner) (447 Points)
Replied 05 September 2011

thanks for your reply Ashish. Yes you catch my doubt. Also can u elaborate it. we are posting depreciation in p&l a/c as a revenue expenditure and at the same time we are deducting it from concerned asste. Is depreciation is an error due to omission? that is my doubt. plssss elaborate. I m not opposing ur opinion. i just want to know elaborately. sry to ask u again.

Rohit Aggarwal (ACA Bcom (H) MBA MCom) (470 Points)
Replied 05 September 2011

depreciation is not an omission bt it affects both p&l n balance sheet. for it, it have to hit the fixed asset account n as well as p&l account bt they cant b hit in one entry thats why it is posted twice to have its effect. it is claimed in p&l account n deducted from value of FA.

ARUN KUMAR (Financial Consultant ) (992 Points)
Replied 05 September 2011

Adjustement Entries Are those Who Have Give Good Understanding .

C.A. Sandeep Wawhal (CA, PGDFM, BCom) (1831 Points)
Replied 05 September 2011

Adjustement enties are passed for rectification in a/cs and also for adjustment of expenses which are not materialy incured during the period but are dues such as provisions for expenses or depreciation etc. Transferred entries are also adjustment entries.

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Jyoti Goyal (Manager) (169 Points)
Replied 05 September 2011

All adjustment entries are done at the time of closing of books. Purpose of the entries are to identify the clear picture of accounts as on date. As concern to Depreciation, this is the method to reduce the book value of assets due to depreciation.

The expenses/Income are included in FY balances through adjustment entries and after that in next FY the same will be paid through these provisional/outstanding accounts.

Ramanuj (Accountant.) (834 Points)
Replied 05 September 2011

Dear All

Without adjustment entries can not final Balance sheet becouse lots of entry lay on without information & same mistake so that end of the financial years made adjustment entry.

Thanks

shwetha (CWA learner) (447 Points)
Replied 05 September 2011

thamks to all for ur valuable opinions

ashish gupta ( student) (1922 Points)
Replied 05 September 2011

Shwetha - for that particular depreciation query

See you have to pass 2 entries for depreciation

1. Depreeciation A/c Dr.

To Asset A/c ( Being Asset depreciated)

2. Now depreciation a/c is closed and it is debited in P&L A/c by following entry

P&L A/c Dr.

To Depreciation A/c

If you pass both these entries there is no need to adjust depreciation. when you forget to charge the depreciation then only adjustment is done in P&L A/c and Balance Sheet and that adjustment is nothing but passing these entries only.

Pls give a feedback on this.