2. Making year-end accrual adjustments

If you are on the accrual basis of accounting, you need to make sure that all income and expenses that have been incurred for the period are recorded. As discussed in Chapter 1, Getting Started with QuickBooks Online, accrual basis accounting means that you recognize income when services have been rendered, regardless of when payment is received. The same concept is applied to expenses. For example, if you made a purchase in December but have not yet received the bill for it, you will need to record an adjusting journal entry before you close the books in order to record the purchase. Some examples of accruals that may be required are prepaid expenses and wages. Be sure to consult with your accountant for the proper recording of these transactions. We will discuss journal entries in more detail later in this chapter.