Final answer:
In Accounting For Service (AFS) accounts, adjustments for unearned revenue and prepaid expenses are necessary, differentiating them from trading accounts where such adjustments are generally not required.
Step-by-step explanation:
The question pertains to the differences between Accounting For Service (AFS) accounts and trading accounts. In AFS accounts, unlike trading accounts, you have to perform adjustments for unearned revenues and prepaid expenses. For instance, if you receive payment for services not yet performed, it's recorded as unearned revenue, which is a liability, and needs to be adjusted once the service is performed. Similarly, if you pay for expenses in advance, like insurance, it sits as a prepaid expense (an asset) until the period to which it relates has passed and then it's adjusted to reflect the expense incurred. In trading accounts, the focus is on buying and selling assets, so such adjustments are not typically necessary.