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Every time a company prepares financial statements, adjusting entries are required. Generally, financial statements are prepared at...

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Accounting

Every time a company prepares financial statements, adjustingentries are required. Generally, financial statements are preparedat the end of each month, the end of each quarter and at the end ofeach year.

Each adjusting entry affects a balance sheet account and anincome statement account. For example, Adjusting Entries forPrepaid Assets or Fixed Assets involve decreasing the asset accountand increasing the expense account. Adjusting entries are made inorder properly follow GAAP.

  1. Based on your review of Section 1 of Chapter 5, describe anadjusting journal entry that is needed at the end of an accountingperiod.
  2. Why are adjusting entries important and how do they contributeto accurate financial reporting?
  3. Accrual accounting is required under U.S. GAAP. One of the mainprinciples of accrual accounting is the Matching Principle, alsoknown as the Revenue Recognition Principle and the ExpenseRecognition Principle. Consult are liable resource online and inyour own words, explain the difference between accrual basisaccounting and cash basis accounting. How does this relate to theMatching Principle?

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