Purpose of adjusting entries, Accounting Basics

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Q. Purpose of adjusting entries?

In this section we exemplify each of the four types of adjusting entries asset/expense liability/revenue, asset/revenue and liability/expense. Observe example the trial balance of the Micro Train Company at 2010 December 31. As you are able to see Micro Train must adjust several accounts before it can prepare accurate financial statements. The adjustments for these accounts engross data already recorded in the company's accounts. In creating adjustments for Micro Train Company we must add several accounts to the company's chart of accounts shown in section 2 these new accounts are currently you are ready to follow as Micro Train Company makes its adjustments for deferred items. If you find the process perplexing review the beginning of this chapter so you clearly understand the purpose of adjusting entries.

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