What you’ll learn to do: Create adjusting journal entries

Here is an excerpt from the official accounting firm opinion of the Form 10-K filed with the Securities and Exchange Commission (SEC) by Alphabet, Inc. for the year ending December 31, 2019 (you know Alphabet, Inc. by its major division—Google):^[1]

REPORT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of Alphabet Inc.

Opinion on the Financial Statements

…In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2018 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles.

Financial statements are created from a trial balance, so that trial balance has to be materially accurate. It doesn’t have to be perfect down to the very last penny, but it has to “present fairly, in all material respects” in accordance with GAAP.

We need to make adjustments to any accounts that need it, and the trial balance is our starting point.