The Balancing Items in a Financial Planning Model Are Variables

question 18

True/False

The balancing items in a financial planning model are variables that adjust to maintain the consistency of a financial model. They are also known as plugs.

---

Definitions:

Income Summary Account

A temporary account used in the closing process to summarize the period's revenues and expenses before transferring the net income or loss to retained earnings.

Permanent Accounts

Permanent accounts refer to the balance sheet accounts whose balances are carried over into the next accounting period, including assets, liabilities, and equity accounts.

Revenue Recognition Principle

An accounting principle that dictates the specific conditions under which revenue is recognized or recorded, ensuring it's captured in the period it is earned.

Reversing Entries

Journal entries made at the beginning of an accounting period to reverse or cancel out adjusting entries made at the end of the previous accounting period, simplifying record-keeping.