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Questions and Answers
What is the purpose of adjusting entries in accounting?
What is the purpose of adjusting entries in accounting?
- To adjust only the balance sheet accounts
- To close all accounts at the end of the accounting period
- To allocate profits to shareholders
- To update accounts and recognize revenues and expenses on an accrual basis (correct)
Which financial statements do adjusting entries affect?
Which financial statements do adjusting entries affect?
- Only income statement
- Cash flow statement
- Both balance sheet and income statement (correct)
- Only balance sheet
What do adjusting entries help to achieve in terms of account balances?
What do adjusting entries help to achieve in terms of account balances?
- Maintain account balances without change
- Update and correct account balances at the end of the accounting period (correct)
- Close the accounts for the next accounting period
- Allocate funds for future investments
What is the impact of adjusting entries on revenue and expenses?
What is the impact of adjusting entries on revenue and expenses?
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Why are corrected balances essential for a company?
Why are corrected balances essential for a company?
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