What is the purpose of adjusting accounts?
Understand the Problem
The question is asking about the purpose of adjusting accounts, which typically refers to the accounting process of updating the values of accounts at the end of an accounting period to reflect accurate financial information. This involves ensuring that revenues and expenses are recognized in the period they are incurred, which is crucial for accurate financial reporting.
Answer
To update all account balances before financial statements can be prepared
The final answer is to update all account balances before financial statements can be prepared.
Answer for screen readers
The final answer is to update all account balances before financial statements can be prepared.
More Information
Adjusting entries ensure that financial statements accurately reflect the income and expenses of an accounting period by accounting for non-transactional changes and timing-related adjustments.
Tips
A common mistake is forgetting to make adjustments for accrued expenses and revenues or prepaid expenses, which can result in inaccurate financial statements.
Sources
- The web page with info on - Example Source - open.lib.umn.edu
