An adjusting entry includes at least one income statement account and at least one balance sheet account.

Accrual accounting recognizes revenues and expenses at the point that cash changes hands.

Accrued revenue is a term used to describe revenue that has been earned but not yet collected.

The adjusting entry to allocate part of the cost of a one-year fire insurance policy to expense will cause total assets to decrease.

The adjusting entry to recognize earned revenue but uncollected will cause total assets and revenues to increase.

Assets become liabilities when they expire.

The adjustment to record depreciation of property and equipment consist of a debit to accumulated depreciation and a credit to depreciation expense.

Adjusting entries are useful in apportioning or allocating costs among two or more accounting periods.

When the reduction in prepaid expenses is not properly recorded, this causes the asset accounts and expense accounts to be overstated.

Failure to record adjusting entry for accrued salaries results in the current year's profit being understated.

The adjusting entry to recognize earned portion of the revenues received in advanced (and credited to unearned revenue account) will cause total liabilities to increase.

If the adjustment for accrued utilities expense is omitted, liabilities and expenses will be understated.

A deferral is the recognition of an expense that has arisen/incurred but has not yet been recorded.

Adjusting entries affect net profit or loss.