Adjusting journal entries are required to comply with the realization and matching principles.

Question

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Adjusting journal entries are made to ensure that financial statements comply with the realization and matching principles, which require that revenues be recognized when earned and expenses be recognized when incurred. Adjusting entries are made at the end of an accounting period to bring certain accounts up-to-date and to align the recognition of revenues and expenses with the period in which they were earned or incurred.

Adjusting Journal Entries Are Required to Comply with the Realization