Adjusting Entries Affect At Least One What?
Are Adjusting Entries Affect Only Real Accounts Or Nominal Accounts? Adjusting Entries affect at least one Income Statement Account and one Balance Sheet Account. Income statement accounts include both revenues and expenses while balance sheet accounts consist of assets and liabilities. Adjusting Entries always affect revenues and expenses i.e., to match revenues with relevant expenses incurred in producing these revenues, and assets and liabilities to update balances of these types of permanent accounts. There are basically two types of adjusting entries i.e., Deferrals And Accruals . Deferrals are related with Prepaid Expenses and Unearned Revenues while Accruals are concerned with Accrued Expenses and Accrued Revenues. Example: Rent Expenses Paid in advance of Rs. 5000 for 5 months (Rs. 1000 paid for each month) on 1 st December, 2020, (Accounting Period Ended On 31 st December) is an example of prepaid expense, e.g., Prepaid Rent . We record the following adjusting en...