#adjusting-entries
Create adjusting entries for accurate period-end reporting
Accrued interest is interest earned or owed but not yet paid; borrowers book Interest Payable, lenders book Interest Receivable, each at month-end.
The 10-column worksheet turns raw ledger balances into statements: add adjustments, prove the adjusted balances, extend each account to its statement.
Depreciation, amortization, prepaids, and accruals post monthly so each period carries its own costs — templates plus a quarterly review keep them honest.
Adjusting entries record what timing left out; correcting entries fix prior errors. Reverse only accruals — reversing a correction resurrects the error.
Accruals book revenue and expenses before cash moves; deferrals hold cash on the balance sheet until earned or used.
After closing entries, only assets, liabilities, and equity carry balances forward — the post-closing trial balance proves the close worked.
Accrued revenue is earned-but-unbilled income (an asset); deferred revenue is unearned cash (a liability) — each clears with its own adjusting entry.
Total debits must equal total credits before you close — the trial balance proves it, then feeds your balance sheet.
How small businesses should book prepaid insurance, rent, software, and retainers — the initial entry, monthly amortization schedule, IRS 12-month rule, and a written de minimis policy that keeps monthly profit comparable and unlocks year-end tax deductions.
Accrued payroll records wages, taxes, and PTO employees earned before period-end but are paid after it. Learn how to calculate the accrual, post the month-end journal entry, and reverse it next month to avoid double-counting.
The allowance for doubtful accounts estimates uncollectible receivables. Learn the aging and percentage-of-sales methods, plus how write-offs keep accounts
A day-by-day close calendar that compresses a typical three-week month-end into five business days. Pre-stage recurring entries, reconcile cash on day one, tie sub-ledgers on day two, post accruals and prepaids on day three, run flux analysis on day four, and lock the period on day five.
