Course Outline
Join PRO

What is the difference between adjusting entries and correcting entries?

Author:
Harold Averkamp, CPA, MBA

Definition of Adjusting Entries

Generally, adjusting entries are required at the end of every accounting period so that a company’s financial statements reflect the accrual method of accounting.

Adjusting entries involve at least one income statement account and at least one balance sheet account.

Examples of Adjusting Entries

The following are some examples of the need for adjusting entries:

  • To report expenses and losses along with the related liabilities for transactions that have occurred but are not yet recorded in the general ledger accounts
  • To report revenues and gains along with the related assets for transactions that have occurred but are not yet recorded in the general ledger accounts
  • To defer future expenses and the related assets that were included in a previously recorded transaction
  • To defer future revenues and the related liabilities that were included in a previously recorded transaction
  • To record depreciation expense and/or bad debts expense and the change in the related contra asset account

Definition of Correcting Entries

Correcting entries are journal entries made to correct an error in a previously recorded transaction. Correcting entries can involve any combination of income statement accounts and balance sheet accounts.

Examples of Correcting Entries

The following are two examples of the need for correcting entries:

  • To correct an erroneous amount used when recording a previous transaction
  • To move an amount from an incorrect account (that was used when recording a previous transaction) to the correct account
Join PRO to Track Progress
Must-Watch Video

Learn How to Advance Your Accounting and Bookkeeping Career

  • Perform better at your current job
  • Refresh your skills to re-enter the workforce
  • Pass your accounting class
  • Understand your small business finances
Watch the Video

Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials

Read all 2,645 reviews

Features

PRO

PRO Plus

Features
Lifetime Access (One-Time Fee)
Explanations
Quizzes
Q&A
Word Scrambles
Crosswords
Bookkeeping Video Training
Financial Statements Video Training
Flashcards
Visual Tutorials
Quick Tests
Quick Tests with Coaching
Cheat Sheets
Business Forms
All PDF Files
Progress Tracking
Earn Badges and Points
Certificate - Debits and Credits
Certificate - Adjusting Entries
Certificate - Financial Statements
Certificate - Balance Sheet
Certificate - Income Statement
Certificate - Cash Flow Statement
Certificate - Working Capital
Certificate - Financial Ratios
Certificate - Bank Reconciliation
Certificate - Payroll Accounting

About the Author

Harold Averkamp

For the past 52 years, Harold Averkamp (CPA, MBA) has worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.

Learn More About Harold

Certificates of
Achievement

Certificates of Achievement

We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping:

  • Debits and Credits
  • Adjusting Entries
  • Financial Statements
  • Balance Sheet
  • Income Statement
  • Cash Flow Statement
  • Working Capital and Liquidity
  • Financial Ratios
  • Bank Reconciliation
  • Payroll Accounting
Badges and Points
  • Work towards and earn 30 badges
  • Earn points as you work towards completing our course
View PRO Plus Features
Course Outline
Take the Tour Join Pro Upgrade to Pro Plus