What is an 'Adjusting Journal Entry'
An adjusting journal entry is an entry in financial reporting that occurs at the end of a reporting period to record any unrecognized income or expenses for the period. When a transaction is started in one accounting period and finished in a later period, an adjusting journal entry is required to properly account for the transaction.
Adjusting journal entries can also refer to financial reporting that corrects a mistake made previously in the accounting period.
Also known as a "balance day adjustment."
BREAKING DOWN 'Adjusting Journal Entry'
An adjusting journal entry involves an income statement account (revenue or expense) along with a balance sheet account (asset or liability) and typically relates to the accounts for accrued expenses, accrued revenue, prepaid expenses and unearned revenue.
When used to correct a previous accounting mistake, an adjusting journal entry usually involves a credit to one account and a debit to another account.