What is The Difference Between Adjusting Entries and Correcting Entries?

Investopedia says, “Accurate financial statements are essential for management and investor decision-making.” This highlights the need for precise record-keeping practices in accounting. It’s important to understand that correcting entries fix mistakes made during bookkeeping, but they don’t change previously reported financial statements or historical records. The Balance Small Business has an article named “Correcting Entries: Definition & Examples“, which explains how important these adjustments are for keeping track of an organization’s finances. For example, a company might forget to include interest income earned from an investment in financial statements for the previous quarter. To get more accurate financial reporting, adjusting and correcting entries were introduced to address specific types of errors.