Importance of Adjusting Entries

Adjusting entries are required for the following reasons:

  • Some events are not journalized on a daily basis. For example, the earning of salary by the employees.
  • Some costs are expired with the passage of time. They are not recorded during the accounting period. Examples are rent, depreciation and
  • Some items may be unrecorded. Example: Utility expenses is paid but not recorded in the book. In this case it is highly required an adjusting entry.