For the next following weeks the coverage is to know the adjusting entries and how to prepare it.

Accrual- under the accrual we have accrued income and accrued expense.

It means: you bought something but, it is still not paid. It is the same way other round when you
already gave your services but your customer has not paid yet.

While…

Deferral- is the other way around, under deferral we have pre- collected income and prepaid
expense.

It means: you already paid for something but, not yet received and customer already paid the item
but it has yet to be rendered.

Depreciation- is the devaluation of an asset over time. Example of an asset that depreciates are:
machines, buildings, service vehicles and etc.

Uncollectible Accounts or Doubtful accounts- this is the allotted amount of money that is possible
not to collect due to some circumstances like when a borrower/ client dies or unexpectedly
unreachable.

Solvency- it shows the company’s ableness to pay it’s long term debts and other financial needs

Liquidity- liquidity is the opposite of solvency. Liquidity is the ableness to pay the company’s short
term debts specially bills that are due.

Profitability- is when a company can make use of their money to help them generate an income.

Reversing Entry- a technique in bookkeeping that is simplified.

Salvage Value- is the full use of depreciated asset until it’s last use of life.

Salvage has it’s own formula which is:

SALVAGE VALUE= purchase price – (depreciation x useful life)

Adjusting entries are prepared dated December 31. Adjusting entries is useful to measure the profit
and to balance the accounts. When failed to recognize any of this accounts it is expected that the
financial position can be wrong.