Question

Explain closing entries and adjusting entries? (2 marks) ​

Answer 1

Answer with

Explanation:

• A closing entry is a journal entry that is passed at the end of the accounting year to transfer balances from a temporary account to a permanent account. All the expenses and gains or income related nominal accounts must be closed at the end of the year. In order to close them, they are transferred to either Trading A/c or Profit and Loss A/c. Journal entries required for transferring them to such account is called a 'closing entry'.

• Adjustment entries are the journal entries that converts an entity's accounting record in an accrual basis of accounting. An accountant makes adjustment entries either before preparation of trial balance or after preparation of trial balance.

• Usually, adjustment entries after preparation of trial balance.

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Answer 2

Answer:

closing entries

All the balances of nominal accounts are closed at the end of the accounting year to facilitate preparation of trading and profit and loss account .This is done by passing closing entries in the journal proper

eg: puchase has debit balance and purchase return has credit balance at the end of the accounting year the balance in the purchase return account is transferred to purchase account

Adjusting entries

adjusting entries are journal entries passed at the end of the accounting period

1)to account the items ommited in the trial balance and to make adjustments for outstanding and prepaid expenses ,revenue accured and received in advance

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