Module Two – Discussion Question

Module Two – Discussion Question - have had...

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Module Two – Discussion Question Q: What are adjusting entries and why are they necessary, in your opinion? A: Adjusting entries make it possible to bring all record keeping up-to-date before the end of an accounting period. The beginning balance statements do not include revenues earned and expenses throughout the month. I believe that adjusting entries are of utmost importance for any company to succeed. As an example of adjusting entries, I am using a tanning salon for further explanation. Ex: A tanning company at the beginning of the accounting period buys new towels for each tanning room and tanning lotions for client purchase. At the end of the month, they
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Unformatted text preview: have had to purchase four new tanning bulbs, a new dryer and pay a utility bill. Since these expenses had not occurred at the beginning of the month, they had not been figured into the ending month statement. This salon also had six people sign up for monthly memberships. The company must now adjust all entries to show revenue (new memberships) and expenses (bulbs, dryer and utility bill), so that the ending balance sheet is brought current. This calculation is the only way this company is able to state what truly occurred financially during that period....
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This note was uploaded on 04/06/2011 for the course ACC 300 taught by Professor Barga during the Spring '11 term at St. Leo.

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