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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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What are adjusting entries, and why are they necessary?

To determine

Explain the meaning of the adjusting entries, and describe why it is necessary.

Explanation

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Adjusting entries:

Adjusting entries are journal entries which are recorded at the end of the accounting year, so that the company updates the income statement accounts (revenue and expenses) and balance sheet accounts (assets, liabilities, and stockholders’ equity. Generally, an adjusting entry affects both a permanent (balance sheet) and a temporary account (income statement)...

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