Week 2 DQ3

What are adjusting entries and why are they necessary? What accounts are subject to adjusting journal entries and why? What are the types of adjusting entries (provide examples)?

It is necessary for organizations to adjust entries so that revenue and expense recognition principles are complied with. In an accrual accounting system revenues must be recorded in the period that they were earned in and expenses must be recognized in the period that they were incurred in. In order to make sure that this happens properly entries must be adjusted so the reports contain the most complete information. Adjustments occur because events are not always recorded daily, some costs expire over time, or because a service has not yet billed. Each time a financial statement is prepared entries...