When and why do we need adjusting journal entries?
My accountant mentioned adjusting entries at month-end, but I'm not totally clear on what they are or why they're necessary. Examples would help especially for accruals and prepayments. Anyone able to explain simply?
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Adjusting entries ensure revenues and expenses are recorded in the correct period (accrual basis). Common types: accrued expenses/revenue, deferred items, depreciation. Without them, your reports can be misleading. This article explains adjusting journal entries with practical examples and their purpose very helpful for understanding the timing impact on financials.