What do end-of-period adjustments help ensure?

End-of-period adjustments are critical for ensuring that financial statements reflect true financial conditions. These adjustments involve updating accounts to accurately represent accrual-based accounting principles, where revenues and expenses are recorded in the periods they occur, regardless of cash transactions. By making these adjustments, businesses can provide a clearer and more accurate picture of their financial performance and position, which is essential for stakeholders such as investors, creditors, and management.

For example, adjustments can include recognizing revenue that has been earned but not yet billed and recording expenses that have been incurred but not yet paid. This process is fundamental to achieving compliance with accounting standards and allows users of the financial statements to make informed decisions based on the actual financial reality of the business.