Question

what is the importance of the following adjusting entries

Deferred Expense:

Deferred Revenue :

Accrued Expense:

Accrued Revenue:

why is it important to complete the adjusting entries?

Answer 1

Basic Accounting

Answer

No

Adjustment entries

Meaning

Importance

1

Deferred Expense

Expense that the company plans to recognise a later accounting period. Paid for a product or services and it hasn’t been delivered or realized yet

Matching Principle of Accounting reflected through the deferred Expense. Irrespective of payment of the period it reflects the impacts of services or product in actual accounting period so that the financial statements will ensure the correct picture.

2

Deffered Revenew

advance payments a company receives for products or services that are to be delivered or performed in the future. As the product or service is delivered over time, it is recognized as revenue on the income statement.

Matching Principle of Accounting reflected through the deferred revenew. Irrespective of receipts/advances of the period it reflects the impacts of services or product in actual accounting period so that the financial statements will ensure the correct picture.

3

Accrued Expense

An accrued expense, in accounting, is an expense that is recognized on the books before it has been paid.

Accrued Expenses is satisying basic accounting concepts of Conservatism and Matching princple.As per the accured Exp concept the actual expense is accounted once it is accured irrespective of payment.So that the financial statements will reflect the true and correct picture

4

Accrued Revenue

Accrued income is income which has been earned but not yet received.Income must be recorded in the accounting period in which it is earned. Therefore, accrued income must be recognized in the accounting period in which it arises rather than in the subsequent period in which it will be received

Accrued Expenses is satisying basic accounting concepts of Matching princple.As per the accured income concept the actual income is accounted once it is incured irrespective of receipt of cash. So that the financial statements will reflect the true and correct picture