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identify tye accounts tgat iften need to be adjusted at tge end of tge acciunting period

identify tye accounts tgat iften need to be adjusted at tge end of tge acciunting period

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Q) identify the accounts that often need to be adjusted at the end of accounting period ?

Answer:-

Adjusting the entries to ensure the account balances are made before the financial statements are generated.

At the end of an accounting period, companies generate financial statements that include the income statement, balance sheet and cash flow statement etc. Adjusting entries are recorded at the end of the accounting period but prior to the preparation of financial statements to ensure the account balances are up-to-date and the financial statement are correct.

These are some illustrations that will help in understanding the adjustments easily:-

Consider that a firm has considerable amounts of depreciate assets such as buildings and machinery etc. Businesses depreciate those assets to take advantage of the tax savings by expensing their costs over their useful lives. If the firm fails to record the adjusting entries and the financial statements are prepared then the  accumulated depreciation a contra-asset will be understated and net assets will be overstated, depreciation expense will be understated, and net income will be overstated.

Assume that a magazine house that received payment in advance from one of its customer for six months delivering magazines.  As the firm publishes and sends magazine each month, one month’s worth (one-sixth) of the advance payment is earned. If the firm fails to record the adjusting entries and the financial statements are prepared,customer advances a liability will be overstated, service revenue will be understated, and net income will be understated.

When the firm prepaid its insurance for one year to get discount, at the end of one month one-twelfth of the prepaid amount expires. If the firm fails to record the adjusting entries and the financial statements are prepared, prepaid insurance an asset will be overstated, insurance expense will be understated, and net income will be overstated.

jeff jeffy answered 4 months ago
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