It is necessary for organizations to adjust entries so that revenue and expense recognition principles are complied with. In an accrual accounting system revenues must be recorded in the period that they were earned in and expenses must be recognized in the period that they were incurred in. In order to make sure that this happens properly entries must be adjusted so the reports contain the most complete information. Adjustments occur because events are not always recorded daily, some costs expire over time, or because a service has not yet billed. Each time a financial statement is prepared entries must be adjusted to assure that all the financial information is up-to-date. Every adjusted entry will have an income statement account and a balance sheet account that it affects. There are two types of adjusting entries – accruals and deferrals. Accruals are accrued revenues and accrued expenses. Accrued revenues are revenues that are earned but not yet received in cash or recorded.