The time period assumption
accountants divide the economic life of a business into artificial time periods
Fiscal year / calendar year

Accrual-basis accounting
Transactions recorded in the periods in which the events occur
companies recognize revenues when they perform services
expenses are recognized when incurres


Revenue recognition PR
recognize revenue  in the accounting period in which the performance obligation is satisfied
Expense recognition PR
match expenses with revenues in the period when the company makes efforts to generate those revenues

Adjusting entries
Ensure that the revenue recognition and expense recognition prs are followed
necessary because the trial balance may not contain up-to-date and complete data
required every time a company prepares financial statements
will include one income statement account and one statement of financial position account

deferrals prepaid expenses / unearned revenues
accruals. accrued revenues/ accrued expenses

deferrals are expenses or revenues that are recognized at a date later than the point when cash was originally exchanged

prepaid expenses cash payment before expense recorded.  insurance/supplies/advertising/rent/building and equipment
- expire either with the passage of time or though use
-adjusting entry: inc (dr) to an expense acc and dec(cr) to an asset acc

accumulated depreciation  - contra asset account ( cr)
appears just after the account it offsets on the balance sheet
book value is the dif

accing for prepaid X
Dr.Expenses Cr.Assets or Contra Asset

Unearned revenues : receipt of cash that is recorded as a liability because the service has not been performed.     cash receipt before revenue recorded
rent / magazine subscriptions / airline tickets / customer deposits

adjusting entry is made to record the revenue for services performed during the period anx to show the liability that remains at the end of the accounting period
results in a decrease (dr) to a liability acx and an inc (cr) to a revenue acc.
accing for unearned revs Dr.Liabilities Cr.Revenues