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Author Question: Why are adjusting entries necessary to portray a more accurate picture of a company's financial ... (Read 56 times)

Mr. Wonderful

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on: Jul 6, 2018
Why are adjusting entries necessary to portray a more accurate picture of a company's financial position?

Question 2

What information would not be found in a firm's annual report?
 
  a. Notes to the financial statements.
  b. Financial Reporting Rulings.
  c. Auditor's report.
  d. High and low stock prices.


chjcharjto14

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Reply #1 on: Jul 6, 2018
Answer to Question 1

Adjusting entries represent the recording of internal transactions in that outside parties are not involved. Without adjusting entries, certain assets (such as Prepaid Insurance, Supplies, and the book values of Building and Equipment) may be overstated. Also, certain liabilities (such as Wages Payable) may be understated. If expenses are incorrectly portrayed, then net income is understated or overstated. Consequently, the balance of the owner's Capital account will not be correct either.

Answer to Question 2

b


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Mr. Wonderful

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Reply #2 on: Jul 6, 2018
Thank you :)


chjcharjto14

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Reply #3 on: Jul 6, 2018
Happy to help you


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