commission etc. are examples of accrued income. Estimates A third classification of adjusting entry occurs where the exact amount of an expense cannot easily be determined. The depreciation of fixed assets, for example, is an expense which has to be estimated. The entry for bad debt expense can also be classified as an estimate. Inventory In a periodic inventory system, an adjusting entry is used to determine the cost of goods sold expense. This entry is not necessary for a company using perpetual inventory. See also Accruals & Deferrals Accounting methods US Generally Accepted Accounting Principles International Financial Reporting Standards External links Further reading: Adjusting Entries Explanation with examples. Adjusting Entries Accounting terminology