Adjusting entries is to update the certain revenue and expense accounts to comply with the matching principle.
As for me, I agree that adjusting entries will cause too much delay in preparing financial statements. However, it is necessary for adjusting entries because even a single transaction also may impact on revenues or expenses in more than one accounting period and also because all transactions have not really been recorded amid the period. Therefore, some income, expense, asset, and liability accounts may not mirror their actual values when recorded in the financial statements if the adjusting entries are not prepared. In conclusion, adjusting entries is crucial to make sure that financial statements mirror the accurate financial position and performance of a business by distributing to the proper period of the income earned and expenses incurred.
Copyright 2019 - Education WordPress Theme.