The process of adjusting entries is essential to ensure that the firm’s financial statements
advocate to the matching principles. Adjustments are needed to reflect the actual value of a
service or product used at the end of the accounting period. The process of closing entries
is to make the new accounting period can begin with zero account balance. The adjusting
and closing processes play vital roles in the accounting cycle.
With the revenue recognition principle, the financial statements can achieve the
requirement of GAAP, by being prepared with the use of accrual basis accounting. To meet
the requirement of revenue recognition and matching principles, adjusting entries must
exist. Adjusting entries affect expenses and revenues which stated on the income
statement. And updating these two kinds of account is completed by posting adjusting
entries. Then, the asset and liabilities accounts in the balance sheet are needed to be
updated by the means of adjusting entries. The revenue and expense accounts, also called
temporary accounts, need to be no balance at the end of the accounting period so that at the
beginning of the next accounting period these two accounts can be easily tracked. The
closing process provide the information need by the financial statement, especially the
income statement and the retained earnings statement.
The unadjusted trial balance is a kind of trial balance which is created before any adjusting
entries are made in the ledger accounts. And the adjusted balance is created after the
relevant adjusting entries are made in the ledger accounts. The post closing trail balance is
