An adjusting journal entry is a journal entry recorded at the end of an accounting period to update account balances before preparing financial statements.

Simple Meaning:

It is an entry made to correct or update income and expenses to the proper accounting period.

Why It Is Needed:

Under accrual accounting, income and expenses must be recorded when they are earned or incurred not when cash is received or paid.

Common Examples:

Recording outstanding salary

Adjusting prepaid expenses

Recording accrued income

Charging depreciation

Example:

If ₹10,000 salary is unpaid at year-end:
Salary A/c Dr. ₹10,000
To Outstanding Salary A/c ₹10,000

In short, an adjusting journal entry ensures accounts are accurate and financial statements are correct.