Final answer:
The statement that adjusting accounts in financial accounting is necessary only to depreciate fixed assets at the end of the period is false. Adjusting entries are also required for accruing interest, recognizing revenue, and recording expenses that have been incurred but not yet paid, ensuring adherence to the revenue recognition and matching principles.
Step-by-step explanation:
In financial accounting, adjusting accounts is a necessary procedure for various reasons, not just for the depreciation of fixed assets. While depreciating fixed assets is a common reason for adjustments, other scenarios such as accruing interest, recognizing revenue not yet received, or expenses that have been incurred but not yet paid also require adjustments. Therefore, the statement that adjusting accounts is always necessary only to depreciate fixed assets at the end of the period is false.
Adjusting entries ensures that the revenue recognition and matching principles are followed. The revenue recognition principle states that revenue should be recognized when it is earned, regardless of when the cash is received. The matching principle directs that expenses should be matched with the revenues they help to generate in the same accounting period. Adjusting entries are made to record transactions that have occurred but are not yet recorded in the company's bookkeeping system at the end of an accounting period.
Examples of other types of adjusting entries include recognizing unearned revenue when a service is performed, not when the cash is received, or accrued expenses, such as utility bills that have been incurred but not yet billed or paid.