(also called accrued liabilities) are expenses already incurred but not yetpaid or recorded.
(or deferred expenses) are expenses paid in cash and recorded as assetsprior to being used.
Other adjusting entries include
of fixed assets,
for bad debts, andinventory adjustments.
Examples of Adjusting Entries
By their nature, all adjusting entries will involve a pairing of either an asset or liability account witha revenue or expense account. Here are some typical examples of adjusting entries of each typementioned above:
-- Say your company provided $1,600 worth of consulting services to theBogus Manufacturing Company over the past month, and today is the end of the accountingperiod. The consulting hours will be billed and collected next month, well past when you'llbe
, closing entries, etc. In this case, youneed an adjusting entry to account for the unbilled services:
Accounts Receivable1,600.00Consulting Fees Earned 1,600.00
-- Bogus Manufacturing Company purchased an annual service contractfrom you for $24,000, which they paid up front. If only three months of their contract arewithin this accounting period, then that means nine months of the contract's revenues areunearned. In order to properly reflect reality, you need an adjusting entry:
Unearned Revenue18,000.00Revenue 18,000.00
-- If you pay weekly salaries and the accounting period ends mid-week,you have accrued salary expenses that you haven't yet paid. You'll need an adjusting entryto reflect the as-yet unpaid salaries: