Bookkeeping Basics Practice Test 2026 - Free Bookkeeping Practice Questions and Study Guide

In accounting, updating balances after the initial trial balance is accomplished by making adjustments. These end-of-period adjustments record revenues earned and expenses incurred in the period that haven’t yet been captured by cash transactions, so the accounts reflect the true activity for that period. This step ensures the financial statements follow accrual accounting, aligning what was earned with what was incurred, not just what cash happened to move. Adjustments cover items like accrued revenues, accrued expenses, prepaid expenses, unearned revenues (deferrals), depreciation, and allowances. The purpose is to place balances on the correct footing before preparing the adjusted trial balance and financial statements. Terms like corrections refer to fixing errors, while substitutions or vague “changes” don’t describe this formal end-of-period process.