Adjusting Entry
Definition
An adjusting entry is a journal entry made at the end of a period to update accounts so the books reflect what actually happened. Adjusting entries handle accruals, prepaids, depreciation, and other timing differences.
Example
At month-end, the bookkeeper records $200 of depreciation for equipment used during the month. This adjusting entry updates both the expense and accumulated depreciation.
Why It Matters
Adjusting entries are what make the books accurate at period-end. Without them, financial statements would miss important activity.