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1. You said there are 4 adjustments that we have to adjust in our books but are they the only ones (true?)
2. These adjustments mean to change them in our books or nominal ledgers (true?)
3. Please explain why we make the reversal entry?
4. We make reversal entry in all the 4 adjustments?
5. Is it correct that once we make the reversal entry then how do we record the adjustment again?
Thanks
1. Yes, they are the only ones (apart from obviously correcting any errors if there are any).
2.They are entries made in the ledger in order to get the correct balances at the end of the year.
3, 4 and 5: I explain the entries in full for each of the 4 adjustments in my lectures.
(However, as I have already told you several times, you cannot be asked to actually write up t-accounts in the exam.)
1. Reversal entry is made to transfer balances from one account to another to reduce the accrual (liability) and expense it to Telephone Account?
2. Similarly we make reversal entry to transfer balances from one account to another to reduce the prepayment (asset) and expense it to Insurance Account?
3. Do we make reversal entries in all 4 adjustments?
4. Once we transfer the balances from one account to another then any expense incurred during the period will be recorded by the bookkeeper making this entry:
DR Telephone expense
CR Cash5. The reversal entry will reduce the standing balances on prepayment and accrual accounts to zero – which means now we have no balance?
Sorry to ask again but ARE they correct?
1. It removes the liability and reduces this years expense.
2. Correct
3. For accruals and prepayments, and for inventory.
4. That is the entry for the payment.
5. Correct.
I really do not know why are you are asking these questions given that you are not asked for the t-accounts. Paper FA expects you to understand the double entry, but it is not a double entry exam – it is a financial accounts exam.
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