adjustment

[Former Member]

hi,

i would like to ask this kind of account. hope can reply point by point.

1) some say the account that recorded the payment difference is an adjustment account.

why the freight account is called an adjustment account? Meaning if the account is absorbing the balance or difference then this account is adjustment account?

Say a Customer is due 10000, But he is paying 9500 only after deducting Freight, the entries will be

Freght A/c Dr 500

Cash/Bank A/c Dr 9,500

To Customer Account 10,000

2) if point 1 is adjustment account then forex gain/loss also adjustment account as the scenario same like point 1. so which means if the account is absorbing the balance or difference then this account is adjustment account?

DR bank 1100

CR customer 1200

DR forex loss 100

3) from F.05 to calculate the unrealized forex gain or loss which to be reversed the next month.

DR p&l unrealized loss from valuation

CR bs adjustment account for foreign currency valuation

May I know this case, both p&l and bs also adjustment account or only bs is adjustment account? and why?

Thanks

[Former Member · Accepted solution]

Hi,

Your point wise reply is as follows:

1) some say the account that recorded the payment difference is an adjustment account.

why the freight account is called an adjustment account? Meaning if the account is absorbing the balance or difference then this account is adjustment account?

Say a Customer is due 10000, But he is paying 9500 only after deducting Freight, the entries will be

Freght A/c Dr 500

Cash/Bank A/c Dr 9,500

To Customer Account 10,000

Ideally this is just called the Freight Expense account. It is also called as an adjustment (misnomer), as in SAP you use the adjustment process (configured in OBXL) to post to this account. You can configure a freight reason code and assign the freight expense account to this code. While receiving the payment you can make the system determine the freight account using the freight reason code and make a differential posting to it.

2) if point 1 is adjustment account then forex gain/loss also adjustment account as the scenario same like point 1. so which means if the account is absorbing the balance or difference then this account is adjustment account?

DR bank 1100

CR customer 1200

DR forex loss 100

No this is not an adjustment nor is the first one, as it is an accounting fact, forex gain loss is to take cognizance of why there was a difference in payment in local currency.

3) from F.05 to calculate the unrealized forex gain or loss which to be reversed the next month.

DR p&l unrealized loss from valuation

CR bs adjustment account for foreign currency valuation

May I know this case, both p&l and bs also adjustment account or only bs is adjustment account? and why?

This is a true adjustment, as you are adjusting your numbers to reflect the period end and year end situation. Both the accounts are adjustment accounts.

Cheers...