Adjustments are entries required at year-end to ensure financial statements reflect the true financial position and performance. Common adjustments: Depreciation (asset wear & tear): Debit Depreciation Expense, Credit Accumulated Depreciation. Closing Inventory (goods in stock at year-end): Debit Inventory (shown in Trading Account), Credit Cost of Goods Sold. Accruals (expenses incurred but not yet paid): Debit Expense Account, Credit Accrued Liability. Prepayments (payments made for future benefits): Debit Prepaid Asset, Credit Expense. Bad Debts (receivables unlikely to be collected): Debit Bad Debt Expense, Credit Receivable Account. Provision for Doubtful Debts (estimated provision for uncertain collection): Debit Provision Expense, Credit Provision Account. Discount on Receivables (allowance for settlement discount): Debit Discount Expense, Credit Discount Account. Interest Accrual (interest earned or owed but not received/paid): Debit Interest Receivable/Payable, Credit Interest Income/Expense. Provision for Warranty/Guarantees: Debit Provision Expense, Credit Provision Account. Adjustment Treatment: Adjusting entries are made in the Adjustment Column of Trial Balance; they affect both Trading/P&L Accounts and Balance Sheet. Documentation: Maintain detailed adjustment schedule showing: Item, Opening Balance, Adjustment, Closing Balance, Where shown (P&L/Balance Sheet). Exam tip: Master common adjustments and their journal entries; practice identifying required adjustments from given information; understand how adjustments affect both accounts.