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Every time a company prepares financial statements, adjusting entries are required. Generally, financial statements are prepared at the end of each month, the end of each quarter and at the end of each year.
Each adjusting entry affects a balance sheet account and an income statement account. For example, Adjusting Entries for Prepaid Assets or Fixed Assets involve decreasing the asset account and increasing the expense account. Adjusting entries are made in order properly follow GAAP.
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