Adjusting Entries

Adjusting Entries

Adjusting entries are made at the end of the accounting period to update certain accounts and ensure that the financial statements accurately reflect the company's financial position and performance. And all adjustment entries are required to be completed by accounting entries.

Adjusting Entries

Accrued Revenues: Revenue has been earned but has yet to be recorded.

Accounts Receivable Account  Debit

Revenue Account  Credit

Recognizes the revenue that has been earned but has yet to be received in cash.

Accrued Expenses: Expenses have been incurred but have yet to be recorded.

Expense Account  Debit

Accrued Liabilities Account Credit

Recognizes expenses that have been incurred but not yet paid.

Prepaid Expenses: payments for expenses have been made in advance.

Expense Account  Debit

Prepaid Expenses Account  Credit

Allocates a portion of the prepaid expense to the current period.

Unearned Revenues: Cash has been received but services have not yet been provided.

Unearned Revenue Account  Debit

Revenue Account  Credit

Recognizes the revenue for services which will be provided in the future.

Adjusting entries is an integral part of the accounting cycle, and they prepare the way for the creation of accurate financial statements.