Each adjusting entry affects a balance sheet account and an income statement account.

Question

Quizplus · Accepted Answer

Adjusting entries are made in the accounting records at the end of an accounting period to allocate income and expenditures to the period in which they actually occurred. Each adjusting entry typically affects one balance sheet account (such as Accounts Receivable, Prepaid Expenses, or Accrued Liabilities) and one income statement account (such as Sales Revenue, Insurance Expense, or Interest Income), ensuring that both the balance sheet and the income statement reflect the correct amounts.

Each Adjusting Entry Affects a Balance Sheet Account and an Income