30. What does the term adjusting entry mean?

When we are adjusting entries at the end of accounting cycle, this means we are updating certain revenue and expenses account to make sure that they are matching the principle amount.

Adjusting entries is important because sometimes at the end of the accounting period, we mistakenly forget to record few entries, and these small errors account for a complicated mistakes when balance sheets are prepared. Hence, there is a need to update the accounts.