Preparing Adjusting Entries at the End of the Financial Year

question 55

Multiple Choice

Preparing adjusting entries at the end of the financial year is necessary:

• A) to prepare the ledger for the next accounting period.
• B) to close the accounts.
• C) to correct any errors made during the period.
• D) to calculate the profit or loss as accurately as possible.

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Definitions:

Production

The process by which raw materials are transformed into finished goods through the use of labor, machinery, and processes.

Customization

The process of modifying or building a product, service, or system according to individual or customer requirements.

Installment Sales Contracts

Contracts in which the buyer agrees to pay the purchase price of an asset in several periodic payments.

Revenue Recognition

The principle that dictates the specific conditions under which revenue can be recognized by an entity in its financial statements.