Adjusting Entry
An adjusting entry is a manual journal entry recording something with no bank transaction behind it, such as depreciation, an accrual, or an owner's contribution.
In short
Not everything in a set of books comes from a bank feed. Depreciation is a paper entry with no cash moving; an accrual records an obligation before money changes hands. Posted directly rather than through categorizing a transaction, but held to the exact same balance rule as anything else.
Also called: adjustment, manual adjustment
Not every financial fact starts as money moving through a bank account. Depreciation is a paper entry — a slice of an asset's cost becoming an expense each period, with no cash actually leaving. An accrual records an obligation before any money has moved at all. An adjusting entry is the mechanism for recording exactly this category of fact, posted directly rather than arriving through categorizing a bank transaction.
Mechanically, an adjusting entry is no different from any other journal entry — the same double-entry mechanism categorization uses under the hood, just posted directly instead of triggered by a bank transaction. It needs at least two lines, debits and credits must sum to exactly zero, and it previews before it commits, the same as anything else that writes to the ledger.
A recurring example: recording depreciation debits Depreciation Expense and credits Accumulated Depreciation, with no cash moving and nothing prompting the entry — no statement line, no charge to categorize. It's something a person or an accountant decides to record on a schedule, which is exactly why it's the entry most often forgotten in small-business bookkeeping kept without an accountant's involvement.
How much to record for a specific adjustment — a depreciation amount, an accrual figure — is often a genuine calculation with real tax consequences, not something to estimate from general knowledge. That's squarely a question for an accountant, who can supply the schedule or the figure to actually post.
What people get wrong
- Expecting BalanceMCP to calculate an adjustment amount, like a depreciation schedule, on its own — the mechanism posts the entry; the figure itself is an accountant's calculation.
- Forgetting an adjusting entry is subject to the exact same balance rule as any other journal entry — no special exemption for "just an adjustment."
- Skipping adjusting entries entirely because nothing prompts them — unlike a bank transaction sitting in an inbox, an adjustment like depreciation has to be initiated on purpose.
Common questions
- Does BalanceMCP calculate my depreciation for me?
- No — it posts the entry once you supply the figures. The amount and schedule for depreciation is a calculation an accountant typically provides, not something to guess.
- Is an adjusting entry different mechanically from a regular journal entry?
- No — it follows the exact same balance rule and preview-before-post pattern. The only difference is that it's triggered manually rather than by categorizing a bank transaction.
Machine-readable: /api/knowledge/concept:adjusting-entry