To ensure revenues and expenses are recognized in the correct period
To prepare the trial balance
Adjusting entries are made to ensure that revenues and expenses are recognized in the period they occur, following the accrual basis of accounting.
Questions & Step-by-step Solutions
1 item
Q
Q: What is the primary purpose of adjusting entries?
Solution: Adjusting entries are made to ensure that revenues and expenses are recognized in the period they occur, following the accrual basis of accounting.
Steps: 5
Step 1: Understand that businesses need to keep track of money they earn and spend.
Step 2: Know that sometimes, money is earned or spent in one period but recorded in another.
Step 3: Learn that adjusting entries help fix these timing issues.
Step 4: Realize that these entries make sure we record money earned and spent in the right time frame.
Step 5: Remember that this process follows a rule called the accrual basis of accounting.
