Authorship

Before the final accounts of a business are prepared it is often necessary to make ADJUSTMENTS to the trial balance. This may be because some transactions have not yet been taken into account. This might be that a rent payment near the end of the trading year might relate partly to the current year and partly to the next year. If this was to happen, we should calculate the fraction that relates to the current year.

The main adjustments that are made to the trail balance are:

· Accrued expenses owed by the business;
· Accrued receipts owed to the business;
· Prepayments;
· Provision for bad and doubtful debts;
· Provision for discounts;
· Depreciation of certain assets;
· Drawings;

The purpose of making adjustments is to produce a set of accounts that provide ‘a true and fair view’ of the firm’s financial circumstances. Details of adjustments are entered in the journal and might also be included as footnotes to the tr...