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Accountants/Business Financial Statements -adjust accounts at year-end or ignore?
Do accountants who are preparing business taxes really do adjusting journal entries for everything from payroll payable to prepaid insurance to interest payable, etc.
It seems like what I learn about accounting in classes is not what is really done in business accounting in reality. I see accountants do some adjusting entries like for accumulated depreciation, but not the categories I mentioned above. Does anyone do accounting the "proper" way? If not the accountant, who else is going to get businesses to have correct financial statements? |
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Keeping a set of books and preparing a tax return are two different processes. Journal entries are prepared to provide a set of books for audit and preparation of the financial statements. All journals made have detailed working papers associated with them. The accounts are then used to prepare a tax return with appropriate adjustments according to tax allowances and rules. It is possible to take a set of books kept on a cash basis and make adjustments to prepare financial statements on an accrual basis, but in a complex organisation this can lead to mistakes so better to maintain the detailed process. What you learn is only a microcosm of all the adjustments needed at balance date
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