What are adjustment entries? Why are they passed?

What are adjustment entries? Why are they passed?


Adjustment entries are the entries which are passed at the end of each accounting period to adjust the nominal and other accounts so that correct net profit or net loss is indicated in profit and loss account and balance sheet may also represent the true and fair view of the financial condition of the business.

It is essential to pass these adjustment entries before preparing final statements. Otherwise in the absence of these entries the profit and loss statement will be misleading and balance sheet will not show the true financial condition of the business.

What are the entries to be passed for Preparing final accounts?
Preparing final accounts - a.) Closing Stock , b.) Depreciation ,c.) Outstanding Expenses , d.) Prepaid Expenses, e.) Accrued Income etc.
Why are Profit and Loss Accounts prepared?
Profit and Loss Account is a period statement which is prepared to show the profit or loss incurred by the Organization…
What are the components of Profit and Loss Account? Explain them
Expenses and losses are shown on the debit side of Profit & Loss Account. Following is the list…
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