Accounting regularization


Regularization is an accounting process whose purpose is to obtain the result of the company after a period of time. This period is normally one year.

To obtain the result of the exercise of a company it will be necessary to carry out a regularization process. To do this, stocks, depreciations and losses in value will have to be adjusted. As part of this procedure, the expense and income accounts will have to be transferred to income for the year.

Accounting regularization process

In order to calculate the result for the year, it is necessary to take into account all expenses and income. Previously, certain adjustments must be made (inventories, depreciation, impairment).

Income and expenses will be recorded in profit or loss as long as they correspond to the same period. The result of the exercise will be obtained by calculating the difference between income and expenses.

Result for the year = Total income - Total expenses

If the expenses are higher than the income we will speak of a debit balance, while if the income is greater than the expenses we will find ourselves before a credit balance. When there is a credit balance we talk about benefits. On the contrary, if a debit balance occurs, we will be facing a loss situation.

Once the result has been obtained, the Corporation Tax must be applied, which will act as an expense, thus reducing the result for the year. Since it functions as an expense, the Corporation Tax must appear in the Profit and Loss Account.

Adjustment and regularization seats

The adjustment and regularization entries are steps prior to obtaining the result for the year.

There are two major accounting adjustment entries:

  • Those in which the inventoried quantity does not coincide with the accounting balances: It will be necessary to make an entry that adjusts the accounting balance to the actual amount of money.
  • Balances that require a valuation correction: The book value will have to be adjusted to the real market value.

Within the regularization of stocks it will be necessary to carry out specific entries for stocks. To do this, the variation in inventories will have to be calculated to adapt the actual balance of the final inventory in warehouse.

Accounting cycle

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