Asked by Emily Gutierrez on May 07, 2024
Verified
Adjusting entries:
A) Affect only income statement accounts.
B) Affect only balance sheet accounts.
C) Affect both income statement and balance sheet accounts.
D) Affect cash accounts.
E) Affect only equity accounts.
Adjusting Entries
Entries recorded at the conclusion of an accounting period to adjust the balances of accounts prior to the compilation of financial statements.
Income Statement Accounts
Accounts used to record transactions affecting a company’s income, expenses, and the resulting net income or loss over a period of time.
Balance Sheet Accounts
Categories within the balance sheet that include assets, liabilities, and shareholders' equity, each of which is essential for showcasing the company's financial health.
- Appreciate the necessity and execution of adjusting entries for accurate financial reporting.
Verified Answer
MS
Megan SullivanMay 13, 2024
Final Answer :
C
Explanation :
Adjusting entries are made at the end of an accounting period to ensure that the financial statements reflect the true financial position and performance of the company. These entries can affect both income statement and balance sheet accounts. For example, an adjustment to accrue for expenses incurred but not yet paid will impact both the income statement (by increasing expenses) and the balance sheet (by increasing liabilities).
Learning Objectives
- Appreciate the necessity and execution of adjusting entries for accurate financial reporting.