Overview
Adjusting entries are a crucial part of the accounting process, ensuring that financial statements accurately reflect a company's financial position. They are made at the end of an accounting period to account for revenues and expenses that have been earned or incurred but not yet recorded. Understa...
Key Terms
Example: A company records revenue when a service is provided, not when payment is received.
Example: Prepaid insurance is a deferral because the expense is recognized over time.
Example: A company provides services in December but receives payment in January.
Example: Salaries owed to employees at the end of the month that will be paid in the next month.
Example: A subscription service receives payment for a year in advance.
Example: Rent paid in advance for the next three months.