Question

Each adjusting entry will always affect __________.

only the income statement accounts

at least one income statement account and one retained earnings statement account

only the balance sheet accounts

at least one balance sheet account and one income statement account

Answer 1

Each adjusting entry will always affect **at least one balance sheet account and one income statement account**.

This is because adjusting entries are made to ensure that the financial statements are accurate and comply with the accrual basis of accounting, which requires that revenues and expenses be recognized in the period in which they occur, regardless of when cash transactions happen.