Adjusting entries c affect both income statement and balance sheet accounts.
Explanation: Adjusting entries are essential in the accounting cycle as they ensure that revenues and expenses are recorded in the period they occur, regardless of when cash transactions happen. These entries typically address items that are accrued (revenues earned or expenses incurred that have not yet been recorded) or deferred (revenues or expenses that have been recorded but not yet earned or incurred). They adjust the accounts to reflect the true financial state of a company, thus impacting both the income statement (by affecting revenues and expenses) and the balance sheet (by affecting assets, liabilities, and equity). Therefore, they play a critical role in providing accurate financial information.