What is the purpose and importance of making end of year adjustments?

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Purpose and importance of making end of year adjustments are as under:

• To correct and rectify any error or mistake may have occurred during the year or so.
• To pass such entries which are nor passed on regular basis during the year like provision of bad debts etc.
• To make sure that generally accepted accounting principles are followed
• To give proper treatment to Loss/Gain due to fluctuation in foreign currencies.
• To make trial balance tally in case you are following manual books writing system.
• To follow any suggestion or advice given by auditor.

Before financial statements are prepared, additional journal entries, called adjusting entries, are made to ensure that the company's financial records adhere to the revenue recognition and matching principles. Adjusting entries are necessary because a single transaction may affect revenues or expenses in more than one accounting period and also because all transactions have not necessarily been documented during the period.

To close Accounting Year Cycle related to Income Statement.

To match the expense & revenue to the accounting year.

Most Important Purpose is to apply the matching principle.

-I   would like to explain that the End of period   journal entries we make to the accounts of prior to the preparation &distribution of the financial statements for a given accounting period.

End -of- period adjustments ensure that the financial statements reflect the true financial position and performance of a  of a business by allocating to the  appropriate period the income earned and expenses incurred.

-They are adjusting-journal- entries & accounting which include accruals,deferrals and assets value adjustments.

-The revenue recognition principale is the basis for making adjusments at the year  end .

It is according to the "periodic Principle" and also "Accrual Basis" in Financial Accounting, we should make sure that the period is adjusted only with ALL it Revenues and Expenses. not more, Also other following or subsequent years has no effect with the current audited financial statement for this period. Depreciasion as a non-cash expense should also be calculated and well adjusted.  All other answers are great.

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end of year Adjustment Done if there was any errors or  to  allocate income or expenses to the period in which they actually occurred . The revenue recognition principle states that income and expenses must match.

It's very important to apply the matching and accrual basis of accounting as it works to carry every period with its expenses and revenues

to meet the GAAP Standard which is preparing statements for specific period fairly and accurately

Accordance with the principle of accrual to meet the terms of the period of the expenses and the corresponding revenue