What is the reason for needing to record an adjusting entry for 20X0?

The need to record an adjusting entry typically arises to ensure that financial statements reflect the true financial position and performance of a business at the end of a reporting period. In this case, the correct answer indicates that the books have not been closed, which suggests that there are transactions or adjustments that have not been finalized before the financial reports are issued.

Adjusting entries are crucial for recognizing revenues earned and expenses incurred within the correct accounting period, and they often occur just before closing the books. This action allows for accurate representations in the financial statements, ensuring compliance with the accrual basis of accounting.

In contrast, if there was no error recorded in the note payable, it would not necessitate an adjusting entry, as the original entry was made correctly. The mention of an expense account could imply a potential adjustment, but it does not directly address the need for adjustments if the primary issue is the closing of books. Likewise, stating that an accrual is involved rather than a deferral might point toward a specific type of adjustment, but it does not fully encapsulate the overall need for an adjustment at this stage.