Question

Adjusting entries are normally prepared ______.

a) at the end of an accounting period before financial statements are prepared
b) at the beginning of an accounting period before transactions are recorded
c) at the end of an accounting period after financial statements are prepared
d) during an accounting period to record events in real time

Answer 1

Adjusting entries are normally prepared a. at the end of an accounting period before financial statements are prepared. They are used to account for items that may have been missed or inaccurately recorded during regular transactions. By preparing these entries, a company can ensure the accuracy of its financial statements.

Step-by-step explanation:

Adjusting entries are normally prepared a. at the end of an accounting period before financial statements are prepared. This is done to ensure that the financial statements reflect the accurate and up-to-date financial position of a company. These entries are necessary to account for items that may have been missed or inaccurately recorded during the regular recording of transactions.

For example, adjusting entries are used to account for accrued revenue or expenses that have been earned or incurred but not yet recorded. Similarly, these entries are used to account for prepaid expenses or unearned revenues that have been recorded in advance but are yet to be consumed or earned.

By preparing adjusting entries at the end of the accounting period, a company can ensure that its financial statements provide a true and fair representation of its financial position and performance.