Question

What are the four different types of adjustments that are frequently necessary before financial statements are prepared at the end of an accounting period?

1) Accruals
2) Deferrals
3) Estimates
4) Revaluations

Answer 1

The four different types of adjustments that are frequently necessary before financial statements are prepared at the end of an accounting period are: accruals, deferrals, estimates, and revaluations.

Step-by-step explanation:

The four different types of adjustments that are frequently necessary before financial statements are prepared at the end of an accounting period are:

1. Accruals: These adjustments are made to record revenue or expenses that have been earned or incurred but have not yet been recorded in the accounts. For example, if a company has performed a service for a customer but has not yet received payment, it would make an accrual to record the revenue.
2. Deferrals: These adjustments are made to record revenue or expenses that have been recorded in the accounts but are not yet earned or incurred. For example, if a company receives payment in advance for a service it will provide in the future, it would make a deferral to record the unearned revenue.
3. Estimates: These adjustments are made to account for uncertainties or uncertainties in financial statements. For example, if a company has to estimate the value of its inventory at the end of the accounting period, it would make an estimate adjustment.
4. Revaluations: These adjustments are made to adjust the carrying value of certain assets or liabilities to their fair value. For example, if the value of a company's fixed assets has significantly increased or decreased since their initial recording, it would make a revaluation adjustment.