In: Accounting
Adjusting entries are needed to ensure the account balances are updated before the financial statements are generated.
At the end of an accounting period, companies generate a set of financial statements to include the income statement and the balance sheet, among others. Adjusting entries are recorded at the end of the accounting period but before the financial statements are prepared to ensure the account balances are up-to-date and that the financial statements, therefore, are the most accurate.
High-end computerized accounting systems may perform most of the adjusting entries automatically while less sophisticated accounting systems may require the adjusting entries to be entered manually. In either case, they are required to update the accounts to produce complete and accurate financial statements.