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This video tutorial explains how to prepare adjusting entries to record revenues when earned and expenses when incurred at the end of each accounting period. Adjusting entries convert a company's records to accrual basis accounting to match incomes and expenses to the appropriate periods. Each entry involves one income statement and one balance sheet account. Deferrals involve prepaid expenses recorded as assets and unearned revenues recorded as liabilities. Accruals involve accrued revenues for services performed and accrued expenses.