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This video tutorial covers preparing adjusting entries for recording revenues and expenses in the period they are earned or incurred. Adjusting entries are made at the end of each accounting period to convert records to the accrual basis of accounting, matching incomes and expenses to the appropriate periods. Each adjusting entry involves one income statement and one balance sheet account. Deferrals (prepaid expenses, unearned revenues) and accruals (accrued revenues, accrued expenses) are types of adjusting entries needed to ensure accurate financial reporting. Prepaid expenses are expenses paid in cash and recorded as assets before use, while unearned revenues are revenues received in cash but recorded as liabilities before services are performed. Accrued revenues are revenues for services performed.
