What is the main reason for calculating adjusting entries in accounting?

The main reason for calculating adjusting entries in accounting is to align financial statements with actual performance. Adjusting entries are necessary to ensure that the revenues and expenses are recognized in the correct accounting period, which is a fundamental principle of accrual accounting. By making these adjustments, a company can accurately reflect its financial position and performance over a specific period, ensuring that financial statements provide a true and fair view of the company’s financial health. This helps stakeholders, including management, investors, and creditors, make informed decisions based on reliable financial data.

Adjusting entries typically include accrued revenues, accrued expenses, deferred revenues, and deferred expenses, all of which help in properly matching income and expenses in the correct accounting period. This matching principle is critical for maintaining the integrity and reliability of financial reporting.