Recording of adjustments in ledger accounts and financial statements: accruals, prepayments, income due, income received in advance, provisions for doubtful debts, depreciation charges, disposal of non-current assets, opening and closing inventory
Adjustments correct the raw figures in the accounts so they reflect reality at the year end. Each adjustment requires specific debit and credit entries in the ledger and changes the income statement or statement of financial position.
Formula
Depreciation (straight-line) = (Cost − Residual Value) ÷ Useful Life | Closing provision = Receivables × Provision %
Real World
A gym paying £12,000 insurance in October for the following year records £9,000 as a prepayment at its December year end, ensuring only three months of cost hits that year's income statement.
Exam Focus
Show the full ledger account with brought-down balance when adjusting provisions — omitting b/d loses marks even if the final figure is correct.
Essay Framework
Use PEEL to structure every paragraph. Tap each step for guidance and an example.
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