Adjusting journal entries are made at the end of the period when
A)The cash basis of accounting is used for all accounting periods.
B)Cash receipts and payments occur before or after the point in time when revenues and expenses should be recognized under the accrual basis of accounting.
C)Management reports its adjustments on the statement of cash flows.
D)The company reports revenue in the same period cash is collected.

Question

Quizplus · Accepted Answer

Adjusting journal entries are made to ensure that revenues and expenses are recognized in the appropriate accounting period under the accrual basis of accounting. This is necessary when cash receipts and payments occur before or after the point in time when revenues and expenses should be recognized. Therefore, option B is the correct answer. The other options are incorrect because they do not relate to the reason for making adjusting journal entries.

Adjusting Journal Entries Are Made at the End of the Period