Class 11 Accountancy - Chapter Financial Statements - 2 NCERT Solutions | Why is it necessary to record the adjust

Welcome to the NCERT Solutions for Class 11th Accountancy - Chapter Financial Statements - 2. This page offers a step-by-step solution to the specific question from Excercise ".$ex_no." , Question 1: why is it necessary to record the adjusting entrie....
Question 1

Why is it necessary to record the adjusting entries in the preparation of final accounts?

Answer

It is extremely important to record the adjusting entries in the preparation of final accounts.

1. This is done in order to assess the true net profit or net loss of the business organization.
2. It helps us record those adjustments which were left or omitted and were not recorded in the accounts.
3. It assists us to separate all the financial transactions into a year-wise category. The financial statements include only those entries which belong to the current year. It rules out the previous and forth coming years’ entries which are the basis for accrual basis of accounting.
4. Further, it provides us the room for making various provisions which are made at the end of the year, after assessing the entries year’s performance.

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