Question

a) What is difference between an adjusting journal entry and a closing journal entry?

b) Identify three accrual accounts that may appear on a Balance Sheet and describe how each account is created.

Answer 1

a)

Adjusting journal entries are drafted to make changes in the books of accounts. If one one to record omissions or have to do changes in any account like of wrongly posted amounts etc. then at that time we make adjustment entries to correct the account. These are made usually before financial statements are made. As the adjustment entries will help to make correct financial statements.

Closing entries are made usually at the end of the year to close the various accounts after the financial statements are being made. Various accounts of income statement like revenue account, expense account etc. are closed. Dividend account are also closed if given. Hence, closing entries are made to close the accounts at the end of the accounting year and balance sheet is drafted.

Allover, adjustment entries records changes and closing entries are made to close the books of accounts.