Adjusting entries are primarily needed for:
A)Cash-basis accounting.
B)Accrual-basis accounting.
C)Current value accounting.

Question

Quizplus · Accepted Answer

Adjusting entries are primarily needed for accrual-basis accounting because this method recognizes revenue and expenses when they are earned or incurred, regardless of when cash is received or paid. As a result, adjusting entries are required to match the revenue earned in a particular period with the expenses incurred to generate that revenue, even if payments have not been made or received yet. This ensures that financial statements provide an accurate picture of a company's financial position and performance. Cash-basis accounting, on the other hand, does not require adjusting entries as revenue and expenses are recognized only when cash is received or paid. Current value accounting is not a common accounting method and is not directly related to the need for adjusting entries.

Adjusting Entries Are Primarily Needed For