Look at that company’s balance sheet and income statement. Based on your readings this week, do you believe that any of the elements require adjusting entries?  Explain.

Adjusting entries | ACCT 3001 – Intermediate Accounting I | Walden University

Yes, the elements of a company’s balance sheet and income statement may require adjusting entries. Depending on the type of financial statement being analyzed, certain items will need to be adjusted to give an accurate reflection of that company’s performance.

For example, if a company had expenses such as cost of goods sold or depreciation that were not recorded on their income statement during the reporting period in question; these would need to be included via adjusting entries so that an accurate representation of net income is reflected on this document. In addition, any outstanding receivables or prepaid expenses should also be adjusted for-increasing liabilities and/or decreasing assets accordingly.

Lastly unreported accruals need to be accounted for according to the relevant accounting standards – increasing revenue for services already provided but not yet invoiced or received payment by the end of that given accounting period. Adjusting entries ensure greater accuracy when analyzing a financial statement over time from one year end to another – giving stakeholders insight into amore complete picture overall.