The Purpose of Adjusting Entries Is To

question 13

Multiple Choice

The purpose of adjusting entries is to:

• A) Adjust the Retained Earnings account for the revenue, expense, and dividends recorded during the accounting period.
• B) Adjust daily the balances in asset, liability, revenue, and expense accounts for the effects of business transactions.
• C) Apply the realization principle and the matching principle to trans?actions affecting two or more accounting periods.
• D) Prepare revenue and expense accounts for recording the transactions of the next accounting period.

---

Definitions:

Beginning Inventory

The initial quantity of goods available for sale at the start of an accounting period.

Ending Inventory

The total value of goods available for sale at the end of an accounting period, calculated by adding purchases to beginning inventory and subtracting sold goods.

Operating Cash Flows

Cash generated from a company's normal business operations, indicating whether a company is able to generate sufficient positive cash flow to maintain and grow its operations.

Financially Healthy

Describes a state where an individual or organization is in good financial condition, with stable cash flow, manageable debt, and solid financial indicators.