Adjusting Entries

Adjusting entries are recorded at the end of an accounting period to adjust ledger accounts for any changes that relate to the current accounting period but have not been recorded. Most of the transactions which are recorded adjusting entries are not spontaneous but are spread over a period of time.all journal entries recorded at the end of a period are adjusting entries. For example, an entry to record a purchase on the last day of a period is not an adjusting entry.


Adjusting entries are of following types:

• Accrued revenues (also called accrued assets) are revenues already earned but not yet paid or recorded.

                  accrued items are:

·                                         Salaries Payable

·                                         Interest Payable

·                                         Income Tax Payable

·                                        Unbilled Revenue

• Unearned revenues (or deferred revenues) are revenues received in cash and recorded as liabilities prior to being earned.

                    deferred items are :

                                                    Prepaid insurance

                                                    Prepaid rent

• Accrued expenses (also called accrued liabilities) are expenses already incurred but not yet paid or recorded.
• Prepaid expenses (or deferred expenses) are expenses paid in cash and recorded as assets prior to being used.
• Other adjusting entries include depreciation of fixed assets, allowance for bad debts, and inventory adjustments.