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Preparation of Final Accounts
What is the primary purpose of adjustment entries in final accounts?
Convert raw trial-balance figures to accrual basis, showing true and fair view of profitability.
How many Balance Sheet and P&L accounts must an adjustment entry touch?
Exactly ONE Balance Sheet account AND ONE P&L account; touching two of same type is error.
Define adjustment entries in accounting.
Period-end entries converting records to accrual basis; reflect no fresh transaction, only correct allocation.
Why is Rent Expense adjusted if paid in next month?
Matching Concept: period expenses must match period revenues; unpaid rent must accrue in current period.
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