AIPB Mastering Adjusting Entries 2025 – 400 Free Practice Questions to Pass the Exam

The general ledger serves as the master record of all accounts in an organization. This means it aggregates all financial information pertaining to each account, reflecting the cumulative effect of all transactions, including those recorded in adjusting entries. When adjustments are needed, they are recorded in the general ledger to ensure that the financial statements present an accurate picture of the entity's financial position and results of operations.

Adjusting entries typically involve modifications to asset and liability accounts, as well as revenues and expenses, to align the ledger with the accrual accounting method. This adjustment process helps to recognize revenues when earned and expenses when incurred, rather than when cash is exchanged, ensuring compliance with accounting principles. As such, the general ledger plays a crucial role in maintaining the integrity and completeness of financial records, allowing for transparent and accountable reporting.

The other options do not accurately reflect the primary function of the general ledger in the context of adjusting entries. For instance, while the general ledger does summarize journal entries, it does much more by serving as the overarching repository for accounting activities. It is not merely a temporary record, nor does it limit itself to cash transactions. Therefore, the function of the general ledger as the master record of all accounts is central to the process of making adjusting entries in accounting