According to the double-entry system, all the adjustments given outside the Trial Balance are psoted at two places. The adjusting entries are necessaiy they enable us to post and take into account those items which are omitted or entered with the wrong amount and/or recorded under wrong heads.
The treatment of adjusting entries is necessary:
(a) It helps us assess the true financial position of an organization based on accrual basis of accounting.
(b) It helps us know the actual figure of profit or loss.
(c) It records the omitted entries and rectifies the errors made.
(d) It helps in providing depreciation and making different provisions, such as bad debts and depreciation.