adjustment

(noun)

a small change; a minor correction; a modification

Related Terms

Examples of adjustment in the following topics:

  • Adjusted R2 as a better estimate of explained variance

    • To get a better estimate, we use the adjusted R2.
    • Because k is never negative, the adjusted R 2 will be smaller – often times just a little smaller – than the unadjusted R 2.
    • The reasoning behind the adjusted R2 lies in the degrees of freedom associated with each variance.
    • What would happen to the adjusted R2?
    • 8.12: The unadjusted R2 would stay the same and the adjusted R2 would go down.

  • Reversing Entries

    • Adjusting entries often disrupts routine transactions, so they are simply reversed on the first day of the new period.
    • In the example of Highland Yoga, adjusting entries are made at the end of July and August.
    • Reversing entries are most often used with accrual-type adjusting entries.
    • To get the expense correct in the general ledger, an adjusting entry is made at the end of the month A for half of the interest expense.
    • This adjusting entry records months A's portion of the interest expense with a journal entry that debits interest expense and credits interest payable.

  • Adjusting Capacity

    • Capacity adjustment takes into account maximum production levels and the alteration of this level depending on how the firm wants to grow.
    • Adjusting capacity takes into account the maximum level of output that can be produced by a firm, and how that can be changed in order to change the potential forecasts of a firm's performance long term .
    • The decision makers at the firm will be able to adjust this capacity in order to grow the firm in a way they feel is optimal.
    • Adjusting capacity will affect the amount of items produced on the assembly line.

  • Adjustments

    • Some of our previously recognized transactions need to be adjusted in later periods:Julya.
    • This is why adjusting entries need to be made under an accrual based accounting system.
    • There are several different types of adjusting entries.
    • Some of our previously recognized transactions need to be adjusted in later periods:
    • Identify the types of adjusting entries and when and why they are made

  • Preparing Financial Statements

    • Preparing financial statements requires preparing an adjusted trial balance, translating it into financial reports, and auditing them.
    • The process of preparing the financial statements begins with the adjusted trial balance.
    • Preparing the adjusted trial balance requires "closing" the book and making the necessary adjusting entries to align the financial records with the true financial activity of the business.
    • Adjusting entries are generally made in relation to prepaid expenses, prepayments, accruals, estimates and inventory.
    • Adjusting entries allow the company to go back and adjust those balances to reflect the actual financial activity during the accounting period.

  • Risk Adjusting the Discount Rate

    • It is at this point that the logic behind adjusting discount rates becomes practical.
    • Adjusting this for the risk-adjusted discount rate is a simple modification, where each future cash flow is multiplied by the estimated likelihood of its occurrence.
    • With this increase in risk, the discount rate can now be risk-adjusted accordingly.
    • All and all, investors must carefully consider the risk in a given investment, and adjust the discount rates accordingly.
    • Realize the reasoning behind adjusting discount rates for risk, and the way this impacts the cost of capital

  • An Expanded Equation

    • Preparing financial statements requires preparing an adjusted trial balance, translating that into financial reports, and having those reports audited.
    • The process of preparing the financial statements begins with the adjusted trial balance.
    • Preparing the adjusted trial balance requires "closing" the book and making the necessary adjusting entries to align the financial records with the true financial activity of the business.
    • Adjusting entries are generally made in relation to prepaid expenses, prepayments, accruals, estimates and inventory.
    • Adjusting entries allow the company to go back and adjust those balances to reflect the actual financial activity during the accounting period.

  • Preparation of the Statement of Cash Flows: Indirect Method

    • The indirect method starts with net-income while adjusting for non-cash transactions and from all cash-based transactions.
    • The indirect method adjusts net income (rather than adjusting individual items in the income statement) for:
    • The indirect method uses net income as a starting point, makes adjustments for all transactions for non-cash items, then adjusts for all cash-based transactions.
    • The adjustments for cash flow would then be made to this amount of net income. $36,000 would be subtracted due to the increase in accounts receivable, and $5,000 would be added due to the increase in accounts payable.
    • The indirect method adjusts net income (rather than adjusting individual items in the income statement).

  • Identifying variables in the model that may not be helpful

    • The adjusted R2 may be used as an alternative to p-values for model selection, where a higher adjusted R2 represents a better model fit.
    • For instance, we could compare two models using their adjusted R2 , and the model with the higher adjusted R2 would be preferred.
    • The fit for the full regression model, including the adjusted R2 .

  • Loss Restoration

    • Under International Financial Reporting Standards, once a fixed asset has been revalued its book value can be adjusted periodically to market value using the cost model or the revaluation model.
    • If an asset becomes impaired and an impairment loss results, the asset can fall under the revaluation model that allows periodic adjustments to the asset's book value.
    • The asset's new book value can be divided by its remaining useful life to adjust the amount of depreciation expense reported on the income statement after the revaluation.
    • Only assets accounted for under the revaluation model can have their book value adjusted to market value.