In which step of the accrual accounting cycle do adjustments to revenues and expenses occur?

Adjustments to revenues and expenses occur after preparing the trial balance. This step is essential in the accrual accounting cycle because it ensures that revenues and expenses are recorded in the period in which they are earned or incurred, rather than when cash transactions occur.

Once the unadjusted trial balance is completed, accountants review accounts for any necessary adjusting entries. These adjustments address items like accrued revenues, accrued expenses, deferred revenues, and prepaid expenses, which may not yet be reflected on the trial balance. After making these adjustments, another trial balance is prepared to verify that the accounting equation remains balanced and that financial statements will accurately reflect the company's financial position and performance for the period.

The completion of these adjustments is critical, as it impacts the reliability of the financial statements that follow, including the income statement and the balance sheet.