25/08/2025
Month-End Adjustment Entries are necessary in accounting to ensure that income and expenses are recorded in the correct accounting period. These adjustments are part of the accrual accounting system and help match revenues with related expenses.
🔹 Common Types of Month-End Adjustments with Journal Entries:
,➡️1. Accrued Expenses
Expenses incurred but not yet paid.
Example: Salary for July (AED 10,000) not yet paid.
Journal Entry:
Dr. Salaries Expense 10,000
Cr. Salaries Payable 10,000
➡️2. Accrued Revenue
Revenue earned but not yet received or invoiced.
Example: Service provided in July worth AED 5,000, invoice to be raised in August.
Journal Entry:
Dr. Accounts Receivable 5,000
Cr. Service Revenue 5,000
➡️3. Prepaid Expenses
Payments made in advance for future expenses.
Example: Rent paid for 3 months in July (AED 9,000).
Journal Entry at payment:
Dr. Prepaid Rent 9,000
Cr. Cash/Bank 9,000
Adjustment entry at month-end:
Dr. Rent Expense 3,000
Cr. Prepaid Rent 3,000
➡️4. Unearned Revenue (Deferred Income)
Cash received in advance for services not yet provided.
Example: AED 6,000 received in July for a 3-month service.
At the time of receipt:
Dr. Cash/Bank 6,000
Cr. Unearned Revenue 6,000
Month-end adjustment:
Dr. Unearned Revenue 2,000
Cr. Service Revenue 2,000
➡️5. Depreciation
Allocating the cost of a fixed asset over its useful life.
Example: Machinery (AED 120,000), depreciation AED 2,000/month.
Journal Entry:
Dr. Depreciation Expense 2,000
Cr. Accumulated Depreciation 2,000