Why is it necessary to make adjusting entries?
A) The accountant has made errors in recording external transactions.
B) Certain facts about the affairs of the business are not included in the ledger as built up from external transactions.
C) The accountant wants to show the largest possible net income for the period.
D) The accountant wants to show the net cash flow for the year.

Question

Quizplus · Accepted Answer

Adjusting entries are necessary to account for certain facts about the affairs of the business that are not included in the ledger as built up from external transactions. These facts may include prepaid expenses, accrued revenues, accrued expenses, and unearned revenues, among others. Adjusting entries ensure that the financial statements accurately reflect the true financial position and performance of the business.

Why Is It Necessary to Make Adjusting Entries