Every year-end adjustment asks one question: which year does this amount belong to? Once you answer it, the layout follows, and you can rebuild it when a question looks new.
This page is for students who know the standard layouts but lose marks on variations. The full lessons are in adjustments.
What is the single question?
Take any figure in the trial balance and ask: did the business use this up during the year, or does part of it belong to another year? If part belongs elsewhere, adjust the expense or income, and show the leftover as an asset or a liability.
This is the matching idea. An expense is matched with the year in which it helped earn income.
Worked examples: one accrual, one prepayment
These are original examples for a fictional business with a year ending 31 December.
Accrual. Electricity paid is RM1 900, but December’s bill of RM200 is unpaid. The year used RM2 100 of electricity, so the expense is RM2 100. The unpaid RM200 is a current liability.
Prepayment. Insurance paid is RM1 800 for 12 months of cover that started on 1 April. The last three months fall in the next year, so they are a prepayment.
The expense for this year is 1 800 × 9 ÷ 12 = RM1 350. The remaining RM450 is a current asset.
| Adjustment | Profit and loss statement | Statement of financial position |
|---|---|---|
| Accrual | Expense up RM200 | Current liability RM200 |
| Prepayment | Expense down RM450 | Current asset RM450 |
The table shows the two-statement effect: each adjustment appears in both.
Why layouts fail you
A memorised layout is tied to the wording you practised. A question that says “paid in advance” instead of “prepaid” looks different, even though the idea is the same. When you ask the single question, the wording matters less.
Students who memorise also miss a quick check. For a prepayment, the expense plus the asset equals the cash paid: 1 350 + 450 = 1 800. For an accrual, the cash paid plus the amount owed equals the expense: 1 900 + 200 = 2 100.
Practise by asking, not by copying
Take five adjustments from your exercise book. For each, write one sentence: “This amount belongs to ___ because ___.” Then compute. Then compare with connecting adjustments to both financial statements.
You can also use the mistake log and paper-error review to record which adjustment types cost you marks.
When one-to-one tuition may help
If new adjustments still throw you, a teacher can give you ones you have not practised and ask you to explain which year each belongs to. The aim is that you understand why the entry is needed, not only that the totals agree.
See online one-to-one Accounting tuition for how starting works.