Most corporate accounting services in Singapore are well equipped to handle all their client’s accounting requirements on a regular basis. However, as an added measure, clients are also encouraged to understand the basics of accounting so as to ensure that everything is properly tended to with no mistakes. For those seeking to understand accounting, a good accounting practice, to begin with, would be to learn about adjusting entries. Here’s what to know:
Adjusting entries usually involve adjusting the journal entries containing information that converts the corporation’s accounting records into the accrual basis of accounting. The adjustment process is typically performed before corporate financial statements are issued. This accounting practice is usually performed in situations where accounting records for expenses/revenues have nothing entered despite having occurred or something has been entered but the amount requires further division between multiple accounting periods. Factors that adjusting entries usually affect are the income statement accounts and balance sheet accounts, since it ensures that both accounts are up to date.
Begin reviewing the balance/amount displayed in the balance sheet accounts and take note of the asset account- make sure the preliminary balance amount located in the general ledger agrees with the bank reconciliation. Check the bank statement to see if there are additional charges included, these additional charges should be entered into the cash account if they have not been done so. Next, check your list of customers for those who have unpaid invoices in the accounts receivable section. As a standard accounting practice, balance sheets must come with reports of all amounts the corporation has the right to receive- including the unpaid amounts, and not just the ones that have already been billed. Income statements should also be reporting all revenues earned- not just the ones that have already been billed.
Entry adjustments are also typically sorted by accruals and deferrals. Accruals are typically the adjustment type for entries where nothing is recorded into expense despite the corporation having incurred expense during the accounting period, as well as when the corporation has a liability/obligation for the unpaid interest up to the accounting period end. Deferrals are the type of adjusting entries that are performed when both expense and revenues have already been entered but require further division between accounting periods.
Another recommended accounting practices to minimise the need for adjusting entries would be for accountants to ensure that the expenses for each accounting period are paid in the period from when they occur. For example, arranging for expenses and other interest payments to be charged to the account at the end of every month, using the current month’s interest- this way, accountants can ensure that they will only have to record interest payment.