![]() Adjusting entries requires updates to specific account types at the end of the period. The required adjusting entries depend on what types of transactions the business has, but as briefly introduced above, there are four major circumstances/scenarios in which adjusting journal entries are necessary. This means a business must recognise revenues and expenses in the proper period, requiring adjustment to certain accounts to meet these criteria. Time period assumption: This requires useful information be presented in shorter time periods such as quarters or months.Expense recognition (matching) principle: This requires matching expenses incurred to generate the revenues earned, which affects prepayment accounts such as insurance expense and supplies expense (Scenario 3). ![]()
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