easy · Financial Accounting accounting-cycle-financial-statements
What is the primary reason that adjusting entries are necessary in an accrual system?
- To guarantee that total debits equal total credits so the accounting equation stays in balance.
- To update the recorded cash balance so that the general ledger agrees with the month-end bank statement.
- To ensure that revenues and expenses are reported in the correct period according to GAAP principles.
- To find and correct the posting and recording mistakes that bookkeepers made during the period just ended.
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