Question

Adjusting entries are essential to the ___________.

• A. matching rule
• B. accrual accounting
• C. proper determination of net income
• D. all of these

Answer 1

The correct option is D all of these

Before financial statements are prepared, additional journal entries, called adjusting entries, are made to ensure that the company's financial records adhere to the revenue recognition and matching principles. Adjusting entries are necessary because a single transaction may affect revenues or expenses in more than one accounting period and also because all transactions have not necessarily been documented during the period. Each adjusting entry usually affects one income statement account (a revenue or expense account) and one balance sheet account (an asset or liability account)