Adjusting entries are required
A) because some costs expire with the passage of time and have not yet been journalized.
B) when the company's profits are below the budget.
C) when expenses are recorded in the period in which they are incurred.
D) when revenues are recorded in the period in which they are earned.

Question

Quizplus · Accepted Answer

Adjusting entries are required because some costs expire with the passage of time and have not yet been journalized. These expenses include prepaid expenses, accrued expenses, unearned revenues, and accrued revenues. Adjusting entries ensure that the financial statements reflect the matching principle, which requires that expenses be recognized in the same period as the revenues they generate.

Adjusting Entries Are Required