Why is it necessary to record the adjusting entries in the preparation of final accounts?
Why is it necessary to record the adjusting entries in the preparation of final accounts?
In the preparation of final accounts, it is always necessary to record the adjusting entries. Following are the reasons in this regard.
First of all, it is necessary to assess the true net profit or net loss of the business organisation.
Secondly, It helps us record those adjustments which were left or omitted and were not recorded in the accounts.
Thirdly, a proper recording of adjusting entries assists us to separate all the financial transactions into a year-wise category. Moreover, the recording of adjusting entries, provides us with the room for making various provisions which are made at the end of the year, after assessing the entire year's performance.
In the preparation of final accounts, it is always necessary to record the adjusting entries. Following are the reasons in this regard.
First of all, it is necessary to assess the true net profit or net loss of the business organisation.
Secondly, It helps us record those adjustments which were left or omitted and were not recorded in the accounts.
Thirdly, a proper recording of adjusting entries assists us to separate all the financial transactions into a year-wise category. Moreover, the recording of adjusting entries, provides us with the room for making various provisions which are made at the end of the year, after assessing the entire year's performance.
