Question

Why Is It Necessary to Give Effects of Adjustment While Preparing Final Accounts?

Answer 1

When the final accounts of a business are prepared it is necessary to provide adjustment entries so that correct accounts can be prepared. Without passing adjustment entries, a business is unable to determine the actual profit or loss for that period.

Also read:

• Adjustment for Accumulated Profits and Losses
• Adjustment of Capitals
• Past Adjustments
• Adjustment for Revaluation of Assets and Liabilities
• Adjustment of Partners Capital