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This video tutorial demonstrates how to prepare adjusting entries to record revenues when earned and expenses when incurred at the end of each accounting period. Adjusting entries convert records to accrual basis, matching incomes and expenses to appropriate periods. Each entry involves one income statement and one balance sheet account. Deferrals include prepaid expenses (paying in cash and recording as assets before use) and unearned revenues (receiving cash and recording as liabilities before service). Accruals include accrued revenues (services performed) and accrued expenses.
