Adjusting process is the method of analyzing and correcting the accounts at the end of the period before the preparation of the financial statements while the journal entries that always update the accounts at the end of every accounting period is the adjusting entries (Godwin & Alderman, 2012). Firstly, it is important to make the appropriate journal analysis of each transaction during the adjustment procedure.
Secondly, post every transaction to the respective ledgers. However, at the end of the accounting period, several balances in the ledger account can be reported without any change in the financial statements. For instance, the cash balance is always reported on the statement of financial position. Some accounts within the ledger need to be updated because the balances for prepaid expenses are usually overstated since the application of such assets should not be recorded on a daily basis.
Journalize the adjusting entries since all of them will influence the income statement and the statement of financial position accounts. Therefore, the adjusting entry will involve either revenue or an expense account, and an asset or a liability account. That is post every adjusting entry to the ledger.
Lastly, at the end of the accounting period, prepare the trial balance to make verification of the total figure on the debit side and ensure that it is equivalent to the total amount of the credits in the general ledger. Once the debits on the general ledger equal to the credits, then financial statements can be prepared from the data of trial balance, and the resulting financial statements will relate to each other. This implies that the net profit will tie to the statement of retained earnings which will consequently match to the balance sheet. Therefore, the statement of financial position will balance (total assets will be equivalent to the total liabilities and stockholder's equity).
References
Godwin, N. & Alderman, C. (2012). Financial ACCT2 (2nd ed.). Cengage Learning.
