Adjusting Entries – MCQ

Practice Question

Intro to Financial Accounting
Adjustments and Quality of Earnings
Adjusting Entries
MCQs

What is the primary purpose of adjusting entries in the accounting system?

Answer +
Correct Answer: C
Explanation +

The primary purpose of adjusting entries is to ensure that financial statements reflect the true financial position of the company at the end of the accounting period. Adjusting entries are necessary to account for revenues earned and expenses incurred that have not yet been recorded in the accounts.

This ensures that the financial statements adhere to the accrual basis of accounting, which matches revenues with the expenses incurred to generate them, providing a more accurate representation of financial performance.