Journal Entries & Adjustments

The Journal Entries & Adjustments section demonstrates the process of recording, modifying, and correcting financial transactions within Xero to ensure accurate bookkeeping and reliable financial reporting.

This practical includes the preparation of journal entries for adjustments, accruals, corrections, reclassifications, and other accounting modifications required to maintain accurate account balances and properly structured financial records.

The process reflects the ability to apply double-entry accounting principles, resolve discrepancies, and support accurate financial statement preparation within a cloud-based accounting environment.

Journal Entries  Section

Journal Entries in Xero are used to record financial transactions that do not originate from invoices, bills, payments, or other standard modules. They help adjust accounts, correct errors, allocate expenses, record accruals/prepayments, depreciation, payroll adjustments, or any manual accounting entries required to maintain accurate financial statements.

Every journal entry contains a debit and a credit, ensuring that the general ledger remains balanced, and it directly impacts the financial statements.

Journal entries are an essential part of advanced bookkeeping and demonstrate strong accounting knowledge, accuracy, and attention to detail.

Accrued Expense 

Accrued expenses are costs that have been incurred but not yet billed or paid. In Xero, an accrued expense adjustment ensures that expenses are recorded in the correct accounting period, even if the supplier’s bill has not been received. This keeps financial statements accurate and compliant with accrual accounting principles.

Journal Entry – Accrued Rent Expense 

This screenshot shows a manual month-end journal created to record accrued rent for the office car park. Since the supplier has not yet issued a bill for October, the expense must still be recognized in the correct period. This ensures accurate financial statements and compliance with accrual accounting principles.

Journal Entry Details

Journal Date: 31 Oct 2025
Journal No: #154
Reference: Accrued Rent (Month-End Adjustment)
Amount: ₦20,000
Narration: Month-end accrual for expenses incurred but not yet billed (October Office Car Park Rent)

Accounts Impacted

Dr Rent Expense (Expense)
Cr Accrued Expenses (Liability)

This recognizes the rent expense for the month and records the unpaid obligation as a liability until the supplier’s bill is received.

What Happened: A journal entry was posted to accrue ₦20,000 for October office car park rent. The supplier had not issued an invoice yet, but the expense belongs to October. This adjustment ensures the financial statements reflect the true cost of operations for the month.

Key Skills Demonstrated

• Applying accrual accounting principles correctly

• Performing month-end adjustments

• Ensuring expenses are recognized in the proper period

• Using liability accounts to track unbilled obligations

• Maintaining accurate financial statements for reporting

Journal Entry – Rent Payment (Clearing Accrued Rent)

This screenshot shows the payment made to the office landlord to settle the previously accrued rent expense for October. Once the payment is recorded, the accrued liability created earlier is cleared.

Payment Details

Payment Date: 6th Nov 2025
Reference: Record Rent Payment
Paid To: Office Landlord
Amount: ₦20,000
Payment Method: Bank Account

Accounts Impacted

Dr Accrued Expenses (Liability)
Cr Bank Account

This removes the liability and reflects the cash outflow from the business.

What Happened: A payment of ₦20,000 was made to the landlord to settle the October car park rent. This payment clears the Accrued Expenses liability that was created through the month-end journal entry.

Key Skills Demonstrated

• Applying correct matching of accrual entries with settlement payments

• Understanding expense accrual and reversal workflow in Xero

• Maintaining accurate liabilities and cash records

• Recording vendor/landlord payments properly

• Ensuring clean audit trail from accrual → payment

Journal Entry – Customer Prepayment (Unearned Revenue)

This represents money received from a customer before the goods or services delivered. Because the obligation has not yet been fulfilled, the amount cannot be treated as income at the time of receipt. Instead, it is recorded as a liability under Unearned Revenue. This shows that the business still owes the customer value in the form of future goods or services. Once the delivery is completed, the liability is cleared and the amount is then recognized as actual revenue in the proper period. This process ensures accurate reporting and compliance with accrual accounting principles.

Customer Prepayment (Unearned Revenue)

This screenshot shows a manual journal created to record an advance payment received from Gonzalez Traders. Since the goods/services have not yet been delivered, the payment cannot be recognized as revenue. Instead, it is recorded as a liability called Unearned Revenue until the business fulfills its obligation. 

This ensures accurate financial reporting and proper application of accrual accounting principles.

Journal Entry Details

Journal Date: 30 Oct 2025
Journal No: Prepayment INV-0013
Reference: Customer Prepayment – Unearned Revenue
Amount: ₦570,000
Narration: Advance payment received from Gonzalez Traders for future service/product delivery. Recognized as Unearned Revenue until earned.

Accounts Impacted

Dr Bank / Cash (Asset)
Cr Customer Deposits / Unearned Revenue (Liability)

This records the cash received and creates a liability representing the company’s obligation to deliver goods/services later.

What Happened:

A customer, Gonzalez Traders, made an advance payment of ₦570,000. Because the business has not yet delivered the product or rendered the service, the amount cannot be recognized as income.
This journal entry ensures the payment is correctly classified as a liability until the revenue is earned.

Key Skills Demonstrated

• Understanding customer prepayments in Xero

• Applying accrual accounting rules for unearned revenue

• Recording advance payments properly

• Managing liability accounts for customer deposits

• Ensuring revenue is not recognized prematurely

Recognition of Revenue from Customer Prepayment

This screenshot shows the manual journal created to recognize revenue previously recorded as Unearned Revenue when Gonzalez Traders made an advance payment. Since the service/product has now been fully delivered on 9th Nov 2025, the amount must be moved from a liability to actual revenue. 

This ensures the financial statements accurately reflect income earned during the correct accounting period.

Journal Entry Details

Journal Date: 09 Nov 2025
Journal No: #141
Reference: Revenue Recognition – Gonzalez Traders Prepayment
Amount: ₦570,000
Narration: Recognition of revenue for services/products delivered to Gonzalez Traders on 9th Nov 2025. Prepayment now earned and reclassified from liability to revenue. 

Accounts Impacted

Dr Customer Deposits / Unearned Revenue (Liability)
Cr Service Income (Income)

This reduces the liability created when the prepayment was received and records the amount as earned income.

What Happened:

The job for Gonzalez Traders was completed and delivered on 9th Nov 2025. Since the obligation has been fulfilled, the prepayment of ₦570,000 must now be recognized as revenue. This journal moves the amount out of Unearned Revenue and into Service Income, ensuring the income is reported in the correct period.

Key Skills Demonstrated

• Applying revenue recognition principles in Xero

• Converting customer deposits into earned revenue after delivery

• Maintaining accurate liability and income balances

• Ensuring compliance with accrual accounting standards

• Tracking the full lifecycle of customer prepayments

Acquisition of Asset & Depreciation Journals

This section covers how I record the purchase of business assets and the systematic allocation of fixed asset cost over time through depreciation. Acquisition journals capture the purchase of intangible assets, linking them to the correct accounts and ensuring accurate reflection of the company’s investments. Depreciation journals allocate the cost of fixed assets over their useful life, reducing the asset value on the balance sheet and recognizing depreciation expense in the income statement. 

Together, these journals demonstrate my ability to manage fixed assets, apply accounting principles correctly, and maintain accurate financial statements over time.

Acquisition of Intangible Asset – Goodwill

This entry records the purchase of Goodwill, an intangible asset that represents the value of a business’s brand reputation, customer relationships, and other non-physical benefits. In Xero, intangible assets acquired through purchase are recorded using a manual journal so they appear correctly on the balance sheet.

Journal Details

Journal Date: 31 Oct 2025
Journal No: #200
Reference: Acquisition of Goodwill – Intangible Asset
Amount: ₦350,000.00
Narration: Recognition of Goodwill purchased during business acquisition.

Accounts Impacted

Dr Intangible Asset – Goodwill
Cr Credit Card Payable

What Happened

A manual journal was posted to capture the acquisition of Goodwill as an intangible asset. This increases the company’s asset base and records the financial outflow or liability arising from the acquisition. Goodwill is non-depreciable and appears under non-current assets on the Balance Sheet.

Key Skills Demonstrated

• Recording intangible asset acquisitions using manual journals

• Understanding the accounting treatment of Goodwill

• Correctly classifying non-current assets in Xero

• Ensuring Balance Sheet accuracy during business acquisitions

• Applying proper debit/credit structure for intangible assets

Depreciation Journal – HP Printer (FA-0001)

This screenshot shows the monthly depreciation journal for the HP Office Printer (FA-0001). Depreciation allocates the asset’s cost over its useful life, reflecting the wear-and-tear and ensuring accurate asset valuation on the balance sheet.

Journal Details

Journal Date: 31 Jan 2026
Journal No: #126
Reference: Monthly Depreciation – HP Printer (FA-0001)
Asset Code: FA-0001
Depreciation Amount: ₦4,666.67
Method: Straight-Line
Narration: Monthly depreciation of HP Office Printer

Accounts Impacted

Dr Depreciation Expense – Office Equipment
Cr Accumulated Depreciation – Office Equipment

This records the monthly expense and updates the accumulated depreciation, ensuring financial statements reflect the true value of the asset.

What Happened

A depreciation journal of ₦4,666.67 was recorded for January 2026 to account for the HP Printer’s usage. The straight-line method spreads the asset’s cost evenly over its useful life. This is a standard month-end adjustment for fixed assets in Xero.

Key Skills Demonstrated

• Recording fixed asset depreciation accurately in Xero

• Applying straight-line depreciation method

• Maintaining up-to-date accumulated depreciation balances

• Understanding month-end accounting adjustments

• Ensuring financial statements reflect true asset values

Bad Debt Journal Entries

This section shows how I manage customer debts that may not be collectible through manual journal entries in Xero. It includes creating provisions for doubtful debts, writing off confirmed bad debts, and recording recoveries of previously written-off debts. Using journals ensures that all these adjustments are accurately reflected in the financial statements. 

This process demonstrates my ability to apply accrual accounting principles, maintain accurate accounts receivable balances, and handle credit risks professionally.