Adjusting entries:
A) Affect only income statement accounts.
B) Affect only equity accounts.
C) Affect cash accounts.
D) Affect only balance sheet accounts.
E) Affect both income statement and balance sheet accounts.

Question

Quizplus · Accepted Answer

Adjusting entries affect both income statement and balance sheet accounts. They are used to update the accounts at the end of the accounting period to reflect the correct amounts of revenues and expenses, and to ensure that the balance sheet accounts accurately represent the company's financial position at the end of the period. Examples of adjusting entries include recording accrued expenses, prepaid expenses, depreciation, and unearned revenues.

Adjusting Entries