Nybrostrand Company



Nybrostrand Company

Adjusting Entries and Trial Balance

The Journal Entries which are made in order to recorded and allocate income to the period in which they earned and to make a proper comparison of revenues and expenses. However, records are required at the end of a period to update the accounts before the preparation of financial statements. The adjustment entries are used so that the transaction are properly distribute between the accounting periods in which they are affected and to record those revenues earned or expenses that have not been recorded before the end of the period. However, when going through the trail balance the auditor discovers errors in the accounting records, financial statements which must be, corrected before making a clear balance sheet which is presented to the stock holders. For example, if the client reduces the inventory as obsolete raw materials, the auditor may make an adjustment reflect the realizable value of inventory. 

Although the adjustment typically found in the audit which is prepared by the auditor, they must be approved by the CEO because the administration primary responsibility for the fair presentation of financial statements. The purpose is not to know the cash flow for the financial period rather to calculate the profit and loss, which might be affected by the adjustment entries. Even though, adjustment entries are known as balance day entries, it can be done at the right time to avoid income and expense confusion. Hence, Adjust the accounting entry is required to bring the account balance to its real value (Albrecht S., Stice E., Stice & Swain M., 2010).

In the Nybrostrand Company, One client had indicated that they were interested in purchasing $35,500 worth of products, so the bookkeeper recorded the transaction. However, the client has not actually committed to the purchase. So the entry, for this transaction would be

Account Payables$35,500

Purchases $35,500

The reverse entry will be created, as the client has not actually committed to the purchase. The entry would be

Purchases $35,500

Account Payables$35,500

Moreover, the bookkeeper may have made a mistake when computing cost of goods sold. She included total production costs for 2011 and did not adjust ending inventory for the $35,500 worth of units left at the end of the year. The amount of ending inventory was determined using a physical count. For this purpose, the account payable account will be adjusted with the $35,500 and the cost of goods sold will be reduce as ...