Adjusting entries are made in the accounting records at the end of an accounting period to allocate income and expenditures to the period in which they actually occurred. They affect both the balance sheet (by adjusting assets, liabilities, and equity accounts) and the income statement (by adjusting revenue and expense accounts). They do not typically affect the cash account directly, as they are adjustments for revenues earned or expenses incurred that have not yet been received or paid in cash.