Adjusting entries are required
A)because some costs expire with the passage of time but have not yet been recorded.
B)when the company's net income is below budget.
C)when expenses are recorded in the period in which they are incurred.
D)when revenues are recorded in the period in which they are earned.

Question

Quizplus · Accepted Answer

Adjusting entries are necessary to account for costs that expire or are used up over time but have not yet been recorded as expenses. This ensures that the financial statements accurately reflect the company's financial position and performance by matching expenses to the periods in which they are incurred, in accordance with the matching principle. Choices B, C, and D describe situations that do not inherently require adjusting entries for their resolution.

Adjusting Entries Are Required