Adjusting entries are necessary to ensure accurate financial statements and they affect both income statement and balance sheet accounts. They update accounts that have not been recorded during the accounting period and make sure that all revenues and expenses are matched correctly. The adjustments may include accruals, deferrals, estimates, and corrections of errors.

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Adjusting Entries

Question 123

Multiple Choice

Adjusting entries:

A) affect only balance sheet accounts.
B) affect only income statement accounts.
C) affect only cash flow accounts.
D) affect both income statement and balance sheet accounts.

Correct Answer: