Figures in some accounts in published financial statements differ from the original recorded amounts or the balances shown in the unadjusted trial balance because of adjusting entries. These adjustments cannot be avoided, and some are part of routine procedures at the close of the accounting period. The items for adjustments affect the entity’s financial position and performance and always involve balance sheet and income statement accounts. The specific accounts to be adjusted depend on the transaction and the reason for the adjustment. This is an important analytical process that affects the correctness of the adjusting entry. A wrong entry to adjust a wrong amount will only lead to another wrong balance in the financial statements and will not improve the usefulness of financial information.
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