Adjusting entries are not needed when assets are used up gradually over several accounting periods after being purchased.

Question

Quizplus · Accepted Answer

Adjusting entries are necessary to allocate the cost of a long-term asset over its useful life. This process is called depreciation and it ensures that the expense of using the asset is recognized over the accounting periods in which it is used. Without adjusting entries for depreciation, the financial statements would not accurately reflect the true value of the asset or the company's profitability.

Adjusting Entries Are Not Needed When Assets Are Used Up