Balance Sheet - What are adjustment entries? Why are they passed? posted by
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
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.
Profit and Loss Account is a period statement which is prepared to show the
profit or loss incurred by the Organization in the year for which it is