What is an 'end-of-year adjustment'?

An 'end-of-year adjustment' refers specifically to changes made to financial records and accounts to ensure accurate financial reporting at the end of a fiscal year. This process is essential for aligning the financial statements with the actual financial condition of the entity. It involves various activities such as accruals, deferrals, and corrections of any errors that may have occurred throughout the year.

This adjustment helps in providing a clear and honest picture of the company’s financial performance, ensuring compliance with accounting principles and standards. Accurate financial reporting is crucial for stakeholders, investors, and regulatory bodies who rely on these reports for decision-making.

In contrast, changes made to the employee roster, modifications to marketing strategies, or updates to inventory management systems, while relevant to business operations, do not fall under the scope of financial reporting adjustments. They address different aspects of the organization and do not contribute to the integrity of the financial statements.