Each adjusting entry affects one or more income statement account, one or more balance sheet account, and never cash.

Question

Quizplus · Accepted Answer

Adjusting entries are made to ensure that financial statements accurately reflect the financial position and performance of the business. They may affect income statement accounts (such as revenues and expenses) as well as balance sheet accounts (such as assets, liabilities, and equity). However, adjusting entries do not involve the receipt or payment of cash, so they do not affect the cash account.

Each Adjusting Entry Affects One or More Income Statement Account