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What are adjusting entries and why are they needed? What is the difference between permanent and temporary accounts? What are closing entries? Give an example of closing an expense account.
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Financial Accounting › Adjusting & Closing Entries

What are the main categories of adjusting entries?

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Answer

Accruals (earned/incurred but not recorded), deferrals (recorded but not yet earned/used, i.e. prepayments and unearned income), and estimates (depreciation, bad-debt provisions).
Accrued wages; Prepaid rent; Depreciation estimate
Real-world example Estimates like bad-debt provision require judgement and are audit-sensitive.
All 5 Adjusting & Closing Entries questions