Adjusting entries are made to update the accounts in an accounting system. Some accounts are not up-to-date hence requiring adjustments to get them to their correct balances.
Adjusting entries are prepared at the end of the accounting period for: accrual of income, accrual of expenses, deferrals, prepayments, depreciation, and allowances.
This chapter will teach you everything about adjusting entries. You will learn the different types of adjusting entries and how to prepare them. You will also learn the second trial balance prepared in the accounting cycle – the adjusted trial balance.