Question

Adjusting entries are Select one: a. usually required before financial statements are prepared b. not necessary if the accounting system is operating properly c. made to balance sheet accounts only d. made whenever management desires to change an account balance

Answer 1

Correct option is (a)

Step-by-step explanation:

Adjusting journal entries are passed before financial statements are prepared to so as to confirm if revenue recognition and matching principles are complied with. Adjusting entries are required to be passed if transactions is spread over multiple financial periods. For example, adjusting entry is passed if goods are received this year but payment will be made next year.

Before income statement and balance sheet is prepared, these entries are passed. Thereafter, adjusting trial balance is prepared and finally financial statements are prepared.