Adjusting entries are often made because some business events are not recorded as they occur. TRUE OR FALSE

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gsenviro eNotes educator| Certified Educator

The statement is true. Adjusting entries or adjusting journal entries are made on the last day of accounting period to account for all the revenues earned and costs incurred during the said period.

There are a number of business transactions that are not recorded as they take place. A great example of such a transaction is insurance, which is (typically) pre-paid for a period of 6 months or an year. The full benefits of such a transaction are only realized over its entire duration. Similarly, there may be unearned revenues, money that a client has paid but to whom no product or service has been delivered (or has been only partially delivered). Accrued expenses, such as utility bills, are another example of adjusting entries. Utility bills are typically due a few days (or a month) after they are actually accrued. Similarly, appreciation, depreciation of equipment, etc, also needs to be accounted for. Hence, adjusting entries are made.