Dictionary / Adjustment
What does Adjustment mean in accounting?
Quick definition
GeneralAny change in an account produced by an adjusting entry. This term guides how bookkeepers record, classify, and explain related transactions in routine financial reporting.
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Examples
Prepaid insurance drops after close
Your pottery studio paid your insurer $2,160 on October 1 for a year of shop liability coverage and coded the whole check to Prepaid insurance. At the October 31 close you post the adjusting entry that uses one month. The adjustment is the $180 drop on Prepaid insurance (from $2,160 to $1,980) and the $180 rise on Insurance expense. Open the Prepaid insurance register in QuickBooks Online or Xero and confirm that drop; if the balance is still $2,160, the entry did not produce an adjustment.
The journal printout is not the change
On January 31 your dog-grooming salon posts an adjusting entry for $425 of wages earned since the January 24 payday. The journal lists a debit to Wages expense and a credit to Accrued wages; that two-line journal is the entry. The adjustment is the $425 increase that then appears on each of those general ledger accounts. Open both registers and confirm each moved $425 before you treat the journal printout as proof.
Why it matters
An adjustment is the change that lands on an account after you post an adjusting entry, not the journal itself. You will see these every month-end if you have prepaid coverage, wages that cross payday, or equipment on a depreciation schedule. They also appear when you correct a stale general ledger balance at close. Treat the journal as the thing that matters and you stop checking whether the account actually moved. Skip the change and last month's prepaid, wage, or depreciation figure is still sitting there while the P&L looks closed.
Further reading
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What is Adjustment in bookkeeping?
Any change in an account produced by an adjusting entry.
When should I use Adjustment?
Use Adjustment when the transaction facts match its definition and you need the ledger and financial statements to reflect the correct account and period.
What is a common mistake with Adjustment?
Adjustment is used for adjustment entries, while Abandonment covers a related but distinct bookkeeping purpose. Review both terms before posting unusual transactions. A common mistake is applying it by label only instead of checking the underlying transaction details.