There are four categories of Adjusting Entries: Prepaid Expenses (including Depreciation), Unearned Revenue, Accrued Expenses, and Accrued Revenue. Within each of these categories, there are a lot of examples that we could show.

For this graded discussion, please choose one category of Adjusting Entries. Within that category, choose one example of an adjusting entry that you might make in a company.

1. Please describe why this adjusting entry needs to be made.
2. Please describe the accounts that are affected by making the adjusting entry.
3. Please describe the impact this adjusting entry has on the Income Statement and the Balance Sheet.
4. Which adjusting entry do you think will be most prone to error? It does not have to be the example you chose.