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Finance & Accounting
Pages 3 (753 words)
The functionality of the double entry journal system relies on the application of a specific logarithm known in the accounting world as the accounting cycle. One of the steps included in the accounting cycle is the recording of adjusting entries…
One of the steps included in the accounting cycle is the recording of adjusting entries. Adjusting entries are always needed every time a company prepares financial statements. At the end of the accounting cycle the four financial statements are ready to be prepared and published for the users of financial information. “Adjusting entries are needed to ensure that the revenue recognition and matching principles are followed” (Weygandt & Kieso & Kimmel, 2003, pg. 91). Adjusting entries are necessary because they are one of the steps of the accounting cycle. The fourth step of the accounting cycle is to journalize and post adjusting entries (Cliffnotes, 2011). Accounting entries exist to make sure revenues are recorded in the period in which they are earned, and expenses are recognized in the period in which they are incurred (Weygandt, et al. 2003). Accounting results are supposed to be reliable and accurate. The use of adjusting entries adds validity to the claim of accuracy in accounting work. A financial statement that benefits from adjusting entries is the balance sheet because adjusting entries allow accountants to adjust the assets, liabilities, and equity accounts. The four types of adjusting entries are prepaid expenses, unearned revenues, accrued expenses and accrued revenues. ...
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