Answer the Following Two Questions

question 50

Essay

Answer the following two questions:
What are adjusting entries and why are they necessary?
What are closing entries and why are they necessary?

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Definitions:

Deduction

An expense that can be subtracted from gross income to reduce the amount of income subject to tax.

Revenue

The total income generated by the sale of goods or services related to a company's primary operations before any expenses are deducted.

Realized

Pertains to gains or losses that have been incurred as a result of actual transactions as opposed to those that are theoretical or projected.

Earned

Income or revenue that has been generated or received for goods sold or services provided.