What
are adjusting entries? Why are they necessary for preparing the final
accounts?
What are adjusting entries? Why are they necessary for preparing the final accounts?
Adjusting entries are the entries of those adjustments which are given outside the trial balance and which help us reflect the true financial position i.e., profit or loss of an organisation. According to the double-entry system, all the adjustments given outside the Trial Balance are posted at two places. The adjusting entries are necessary they enable us to post and take into account those items which are omitted or entered with the wrong amount and/or recorded under wrong heads.
The treatment of adjusting entries is necessary.
(i) It helps us assess the true financial position of an organisation based on accrual basis of accounting.
(ii) It helps us know the actual figure of profit or loss.
(iii) It records the omitted entries and rectifies the errors made.
(iv) It helps in providing depreciation and making different provisions, such as Bad Debts and depreciation.
Adjusting entries are the entries of those adjustments which are given outside the trial balance and which help us reflect the true financial position i.e., profit or loss of an organisation. According to the double-entry system, all the adjustments given outside the Trial Balance are posted at two places. The adjusting entries are necessary they enable us to post and take into account those items which are omitted or entered with the wrong amount and/or recorded under wrong heads.
The treatment of adjusting entries is necessary.
(i) It helps us assess the true financial position of an organisation based on accrual basis of accounting.
(ii) It helps us know the actual figure of profit or loss.
(iii) It records the omitted entries and rectifies the errors made.
(iv) It helps in providing depreciation and making different provisions, such as Bad Debts and depreciation.
