Final answer:
The two basic categories of adjusting entries in accounting are
Accrued Revenues and Prepaid Expenses, and Unearned Revenues and Accrued Expenses.
Step-by-step explanation:
The two basic categories of adjusting entries in accounting are Accrued Revenues and Prepaid Expenses and Unearned Revenues and Accrued Expenses.
Accrued Revenues refer to revenues that have been earned but have not yet been received or recorded. An example of this would be when a company provides services to a customer but hasn't received the payment yet.
Prepaid Expenses, on the other hand, are expenses that have been paid in advance but haven't been used or consumed yet. An example would be when a company pays for insurance for the entire year but the coverage extends beyond the current accounting period.
Unearned Revenues are revenues that have been received in advance but haven't been earned yet. For example, when a customer makes an upfront payment for a product or service that will be delivered in the future.
Accrued Expenses are expenses that have been incurred but haven't been paid yet or recorded. For instance, if a company has received services from a supplier but hasn't received the invoice or made the payment yet.