Unit 3: Adjusting Entries
By now, you should understand the guiding principles and concepts of accounting. You will now need to learn how to synthesize this information, which often requires an adjusting journal entry. Before you can learn about adjusting entries, you will need to be able to distinguish between cash- and accrual-based accounting. There is some distinction between the two methods, and while some smaller businesses may be able to effectively use a cash basis of accounting, most organizations use an accrual basis of accounting. Because of this, we will use the accrual basis in this course. Adjusting entries are needed in order to convert the activities that happen in your business to meet the rules that govern the accounting system. For example, if you paid for a year's rent up front, you need to make an adjusting entry to show one month of rent expense. If you did not make this adjustment, your results for this month would be artifically high, and you might make poor business decisions as a result.
Completing this unit should take you approximately 5 hours.
3.1: Adjustments for Financial Reporting
3.2: Visualizing the Adjusting Journal
Unit 3 Practice