Accounting is basically tracking goods delivered and services performed (the ”Events”) by or to a business or organization, and reporting the financial effects of each Event in a specified time period.

These Events are basically recorded in the period in which they actually happened, regardless of when the money was received or paid, or when the related invoice was dated. This is known as the accrual basis of accounting.

Therefore, an Event can happen in one month, but not be paid or invoiced until a different month. When this situation happens, the Event must be recorded in the month it happened by entering a general journal entry to adjust for this difference. This is known as an adjusting journal entry because it's not an invoice, and it's not cash or check.