Final answer:
Year-end adjusting entries are needed for revenue earned on account if services are yet to be provided, cash advances for future services, and prepayments for insurance policies covering subsequent periods.
Step-by-step explanation:
To identify the events that would require a year-end adjusting entry, we must evaluate each scenario based on accounting principles, particularly the matching principle and the accrual basis of accounting. Under accrual accounting, revenues are recognized when earned and expenses are recognized when incurred, regardless of when cash is exchanged. Here are the events that generally require a year-end adjusting entry:
- The recognition of revenue on account doesn't necessarily require adjustment unless the service hasn't yet been provided by year-end, in which case an adjustment to defer the revenue would be necessary.
- A cash advance collected for services to be provided in the coming year requires an adjusting entry. The cash received must be recorded as unearned revenue (a liability) until the service is performed.
- Paying for an insurance policy that provides coverage during the next year would require an adjusting entry to record the expense over the period that the insurance policy covers (prepaid expenses).
Issuing common stock, collecting or paying cash for various transactions do not require year-end adjustments, as these are either investment activities, collections on previous revenues, or expenses that have already been matched with their respective periods.