why are adjusting journal entries important 
because many companies operate where actual delivery of goods may be made at a different time than payment either beforehand in the case of credit or afterward in the case of pre payment there are times when one accounting period will end with such a situation still pending in such a case the adjusting journal entries are used to reconcile these differences in the timing of payments as well as expenses without adjusting entries to the journal there would remain unresolved transactions that are yet to close example of an adjusting journal entryfor example a company that has a fiscal year ending december 31 takes out a loan from the bank on december 1 the terms of the loan indicate that interest payments are to be made every three months in this case the company s first interest payment is to be made march 1 however the company still needs to accrue interest expenses for the months of december january and february since the firm is set to release its year end financial statements in january an adjusting entry is needed to reflect the accrued interest expense for december to accurately report the company s operations and profitability the accrued interest expense must be recorded on the december income statement and the liability for the interest payable must be reported on the december balance sheet the adjusting entry will debit interest expense and credit interest payable for the amount of interest from december 1 to december 31 