The Basics of Adjusting Entries

The Basics of Adjusting Entries - The Basics of Adjusting...

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The Basics of Adjusting Entries In order for revenues to be recorded in the period in which they are earned, and for expenses to be recognized in the period in which they are incurred, companies make adjusting entries. Adjusting entries ensure that the revenue recognition and matching principles are followed . International Note Recording correct financial information requires good internal control. Internal controls are a system of checks and balances designed to detect and prevent fraud and errors. The Sarbanes-Oxley Act requires U.S. companies to enhance their systems of internal control. However, many foreign companies do not have this requirement, and some U.S. companies believe that not having it gives foreign firms unfair advantage in the capital markets. Adjusting entries are necessary because the trial balance —the first pulling together of the transaction data—may not contain up-to-date and complete data. This is true for several reasons: 1. Some events are not recorded daily because it is not efficient
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The Basics of Adjusting Entries - The Basics of Adjusting...

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