Adjusting Entries

Adjusting entries are made at the end of an accounting period to ensure that revenues and expenses are recorded in the correct period. They update accounts that would otherwise be inaccurate.

Common types include accrued revenues (earned but not yet received), accrued expenses (incurred but not yet paid), deferred revenues (received but not yet earned), and prepaid expenses (paid but not yet used).

For example, if your employees worked the last week of December but get paid in January, an adjusting entry records that wage expense in December — the period the work was actually performed.