Adjusting the Accounts

Solution

A trial balance not contain up-to-date and complete financial information because
  1. Some events are not recorded daily because it is not efficient to do so. Examples are the use of supplies and the earning of wages by employees.
  2. Some costs are not recorded during the accounting period because these costs expire with the passage of time rather than as a result of recurring daily transactions. Examples are charges related to the use of buildings and equipment, rent, and insurance.
  3. Some items may be unrecorded. An example is a utility service bill that will not be received until the next accounting period.
The company analyzes each account in the trial balance to determine whether it is complete and up-to-date for financial statement purpose

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