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Such adjusting entries will help to improve the accuracy of financial statements. Adjusting entries is necessary because accrual accounting systems demand that the events are recorded accurately. They are not to be recorded strictly on the basis of cash transactions, and all of these adjustments serve to translate the accounting figures that arise from the cash accounting to accrual accounting by incorporating all of the different non-cash transactions and ensuring that every element of the income statement and balance sheet is correct.
On a computerized accounting system, there might be software that can actually make these entries. If not they will need to be entered manually into the system.
As with any accounting, there are certain ethical issues that need to be understood. The accrual statements are where we report our profits and losses. It is important that they are completed accurately. Any fraud is illegal and cannot be tolerated. We have an ethical duty to all stakeholders to ensure that the financial statements that are produced accurately reflect the financial condition of the company.
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The most important is that it is relatively easy, if the numbers are adjusted, for somebody to steal from the company. If people expect there to be a certain amount of cash on hand, they will not ask questions if that is the amount on hand. In order words, somebody stealing from the company is likely to want that covered up in the accounting records.
It is important to always remember that accounting is an honorable profession. What we do matters to the company and to the different stakeholders of the company. With something like adjusting entries, it is critical that we get those right, in order to translate the accounting records that we keep all year into the types of financial statements that our owners expect of us. We must ensure that all entries are entered into the computer system accurately and in a timely manner, and that there is never any fraud or other suspect activity.
Works Cited:
No author. (2012). Adjusting entries. Accounting Coach.com. Retrieved November 29, 2012 from http://www.accountingcoach.com/online-accounting-course/08Xpg01.html
Works Cited:
No author. (2012). Adjusting entries. Accounting Coach.com. Retrieved November 29, 2012 from http://www.accountingcoach.com/online-accounting-course/08Xpg01.html
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