Adjusting entries are unnecessary for transactions that do not involve revenue or expense activities,such as selling common stock or paying dividends.

Question

Quizplus · Accepted Answer

Adjusting entries are primarily used to record transactions that have not been captured by the end of the accounting period under the accrual basis of accounting, specifically affecting revenue and expense accounts, along with their related balance sheet accounts. Transactions like selling common stock or paying dividends do not involve revenue or expense activities; they affect equity accounts and do not require adjusting entries for their recognition.

Adjusting Entries Are Unnecessary for Transactions That Do Not Involve