Adjusting entries help achieve the goals of accrual accounting by applying which two accounting principles?
A)Business entity concept and realization principle
B)Cost principle and the accounting equation
C)Realization principle and matching principle
D)Matching principle and safety principle

Question

Quizplus · Accepted Answer

Adjusting entries help achieve the goals of accrual accounting by applying the realization principle and the matching principle. The realization principle requires recognizing revenue when it is earned, not when payment is received, while the matching principle requires matching revenues with expenses in the same period in which they are incurred. Adjusting entries are necessary to ensure that revenues are recognized and expenses are matched properly, thereby achieving the goals of accrual accounting. Choice A is incorrect because the business entity concept focuses on keeping business transactions separate from personal transactions, while the realization principle focuses on recognizing revenue when it is earned. Choice B is incorrect because the cost principle states that assets should be recorded at their historical cost, and the accounting equation is a fundamental principle of accounting that ensures that the balance sheet remains balanced. Choice D is incorrect because there is no such thing as a "safety principle" in accounting.

Adjusting Entries Help Achieve the Goals of Accrual Accounting by Applying