Adjusting Entries
Definition
Journal entries posted at the end of a period so that revenue and expenses fall in the right period under accrual accounting. The usual categories are accruals, prepayments, depreciation, and provisions such as doubtful debts.
Related Terms in Accounting Principles
Revenue Recognition
The rules determining when a sale may be recorded as revenue, which is when control of the goods or services passes to the customer rather than when cash arrives. Misapplying it is one of the most common causes of restated accounts.
ASC 606
The US GAAP revenue standard, Revenue from Contracts with Customers. It applies a five-step model: identify the contract, identify the performance obligations, determine the transaction price, allocate it to the obligations, then recognise revenue as each obligation is satisfied.
IFRS 15
The IFRS revenue standard, Revenue from Contracts with Customers, substantially converged with ASC 606 and built on the same five-step model. It replaced earlier, industry-specific revenue guidance with one principles-based approach.
GAAP
Generally Accepted Accounting Principles, the accounting framework used for US financial reporting and maintained by the Financial Accounting Standards Board. More rules-based than IFRS, and required for SEC registrants.
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