Under the accrual basis of accounting,adjustments are often made for prepaid expenses and unearned revenues.

Accrual Basis

An accounting method where revenue is recorded when earned and expenses are recorded when incurred, regardless of when cash transactions occur.

Prepaid Expenses

Future expenses that have been paid in advance and are recorded as assets until they are actually incurred.

Unearned Revenues

Unearned revenues are funds received by a company for goods or services yet to be delivered or performed, recognized as a liability on the balance sheet until the obligation is fulfilled.