Fin621 Assignment No. 1 solution

Assignment No. 01

FIN-621 Financial Statement Analysis

Adjustment Entry (1)

Accrual Entry of Salary Expense,

Date	Description	L/F	Debit Amount (Rs.)	Credit Amount (Rs.)
31-12-09	Salaries Expense Salary Payable (Salary expense M/O Dec-09 Adjusted)		660	660

Explanation:

Salary month of Dec-09 accrued but not yet paid. So we make an accrual entry of salary expense for charge this expense in Dec-09 trial balance.

Adjustment Entry (2)

Adjustment Entry of office supply,

Date	Description	L/F	Debit Amount (Rs.)	Credit Amount (Rs.)
31-12-09	Office Supply Expense Office Supply Prepaid (Office Supply expense M/O Dec-09 Adjusted)		432	432

Explanation:

Office supply purchase for more then one financial period. We do not charge this expense in current accounting period because we use its benefit long time. So with this entry we charge only such an amount as uses of office supply.

Adjustment Entry (3)

Depreciation charge on Machinery,

Date	Description	L/F	Debit Amount (Rs.)	Credit Amount (Rs.)
31-12-09	Depreciation Machinery Accumulated depreciation machinery (Depreciation on Machinery m/o Dec-09 adjusted)		660	660

Explanation:

Depreciation is an expense who we charge on relevant fixed asset. Because fixed assets like Building, machinery, give us a long time benefit so we charge it in our balance sheet in Assets side but as its uses its life decrease. And this decrease in life on fixed asset we charge it as expense in the income statement as the name of depreciation.

Adjustment Entry (4)

Consulting Fees (Income) Receivable,

Date	Description	L/F	Debit Amount (Rs.)	Credit Amount (Rs.)
31-12-09	Consulting Fees Receivable Consulting Fees Income (Consulting Fees Receivable m/o Dec-09 adjusted)		1020	1020

Explanation:

This entry made because we provide services to our customer but still not received payment. So we debit it’s our receivable account who effect in balance sheet in asset side and credit our income account that its increase our net income in income statement. Its increase our assets (Balance Sheet) and also increase our income (Income Statement).

Adjustment Entry (5)

Unearned Consulting Fees,

Date	Description	L/F	Debit Amount (Rs.)	Credit Amount (Rs.)
31-12-09	Unearned Consulting Fees Consulting Fees Income (Adjust unearned Consulting Fees Account )		252	252

Explanation:

Some time customer give us advance payment but not yet use our services. This advance consulting fees is not our income so we charge it as unearned income account who effect in balance sheet in liability side. But when we give services against this advance income then we charge it by the above mention entry in our income statement. Its decrease liability (Balance Sheet) and increase our income (Income Statement).

The above highlighted columns are the adjustments which cause the trial balance to change..
In other words, it is the comparison of trail balance and adjusted trial balance.