Assume today is December 31, 2019. It has been a wonderful year-end for you because your business is doing great! But don't forget that you need to complete all adjusting entries today Dec 31, 2019.

My 1st question: Why do you need to adjust entries for your business? Please feel free to use examples to explain this question if needed.

My 2nd question: How to adjust entries? Please use either Deferred accounts or Accrued accounts to explain this question. Here I want to show you how I'm going to submit my answer to the second question. Please feel free to follow my 3-steps instruction.

Step 1: Choose an account

Deferred Revenue (Unearned Revenue)

Step 2: Provide a scenario

for example:

I am the owner of Prof. Shu's Catering, LLC. On Dec 16, 2019, one of my clients came to my office and asked me to provide the catering service at his birthday party for the next 30 days. He paid me $1,000 in advance. Deal! I will need to adjust it on Dec 31. I will Debit "Unearned Revenue" for $500, and Credit "Service Revenue" for $500.)

Step 3: Write down the adjusting entry. (Only entries, no ledgers needed)

for example:

Date	Accounts and Explanation	Debit	Credit
Dec. 31	Unearned Revenue	500
	Service Revenue		500
	To record service revenue earned that was collected in advance.

Answer rating: 100% (QA)

Why Do You Need Adjusting Entries Adjusting entries are crucial for ensuring accurate financial statements at the end of an accounting periodtypically ... View the full answer