Adjusting entries are necessary to
1. obtain a proper matching of revenue and expense.
2. achieve an accurate statement of assets and equities.
3. adjust assets and liabilities to their fair market value.
A) 1
B) 2
C) 3
D) 1 and 2

Question

Adjusting entries are necessary to 
1. obtain a proper matching of revenue and expense.
2. achieve an accurate statement of assets and equities.
3. adjust assets and liabilities to their fair market value.
A) 1
B) 2
C) 3
D) 1 and 2

Quizplus · Accepted Answer

Adjusting entries are necessary to achieve a proper matching of revenue and expense and to achieve an accurate statement of assets and equities. Adjustments that aim to adjust assets and liabilities to their fair market value are not always necessary but may be required in certain situations such as when there is a significant change in the value of an asset or liability. Therefore, the best answer would be D, since it includes both options 1 and 2, which are always necessary for adjusting entries.

Adjusting Entries Are Necessary to