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This video tutorial demonstrates how to prepare adjusting entries to record revenues and expenses in the period they are earned or incurred. Companies make adjusting entries at the end of each accounting period to align their records with accrual basis accounting, aiming to match incomes and expenses to the right period. Each adjusting entry involves one income statement account and one balance sheet account. Deferrals, including prepaid expenses and unearned revenues, require adjusting entries. Prepaid expenses are paid in advance and recorded as assets, while unearned revenues are received in advance and recorded as liabilities. Accruals, including accrued revenues and expenses, also require adjusting entries. Accrued revenues are for services performed but not yet billed.