When should adjusting entries be made in the accounting process?

Adjusting entries are essential for ensuring that a company's financial statements accurately reflect its financial position and performance by adhering to the accrual basis of accounting. These entries are made at the end of an accounting period, which is the correct answer to the question.

Adjusting entries are necessary because they ensure that revenues and expenses are recognized in the period in which they occur, rather than when cash is exchanged. This process allows for the proper matching of income and expenses, which is crucial for accurate reporting. As a result, these entries typically include adjustments for accrued revenues, accrued expenses, deferred revenues, and prepaid expenses.

Making these entries at the end of the accounting period helps prepare the financial statements such as the income statement and balance sheet, providing users of those statements with a fair view of the company's financial performance and position.

Timing these adjustments is critical, as doing them too early, too late, or at the wrong times in relation to other processes can lead to distorted financial reporting and potential compliance issues. Consequently, the end of an accounting period is the appropriate time to perform these adjustments to ensure that all financial activities are accurately recorded for that period.