Adjusting journal entries are used to record transactions that have occurred but have not yet been properly accounted for in accordance with the accrual basis.
Adjusting journal entries are entered in the company’s general ledger at the end of the reporting period to comply with the principles of matching and revenue recognition.
The most common types of adjusting journal entries are accruals, deferrals, and estimates.
It is used for accrual accounting purposes when one reporting period transitions into another.
Companies using cash accounting do not need to make corrective accounting entries.