Adjusting Entry

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Adjusting Entry

1. An adjustment made to a company's financial records at the end of an accounting period to assign revenues and expenses to the days on which the events justifying them occurred or on which the revenue was received, depending on the situation. For example, if a company is paid in advance for the purchase of some good, an adjusting entry may recognize that revenue on the day the good was delivered. Likewise, if the company was paid after delivery, it may recognize the revenue on the day it was paid. See also: Accrued Expenses, Accrued Revenue, Prepaid Expenses, Unearned Revenue.

2. Any correction to a previous entry in a company's financial records.
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All adjusting entries that are above a predetermined limit should be monitored and reviewed in real time, or as quickly as possible after entry,
* All adjusting entries must have substance to them.
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The parent then makes appropriate adjusting entries on its books for intercompany transactions.
Table I summarizes these year end adjusting entries.
The Sarbanes-Oxley Act of 2002 (SOA) has added importance to proposed adjusting entries to financial statements.
* All adjusting entries to manufacturing overhead and inventory accounts should be reviewed by an independent member of management.
** Proposing adjusting entries, provided that the client reviews the entries and the member is satisfied that management understands the nature of the proposed entries and the impact the entries have on the financial statements.
At year-end, the return preparer made adjusting entries to reclassify the loans as running to and from the shareholders.
* Have there been significant adjusting entries that have increased the inventory balance?