Accrual Accounting

Question 1

Accrual Basis

Answer 1

Recognizes/reports economic activities of an entity in the period the activity was INCURRED, regardless of when the cash activity takes place

Question 2

Accrual Basis

Answer 2

Recognizes/reports economic activities of an entity in the period the activity was INCURRED, regardless of when the cash activity takes place

Question 3

Deferral Accounts

Answer 3

1. Cash paid first –> prepaid expenses (asset) –> good/service is used

OR

2. Cash Received 1st –> Unearned Rev (liab) –> good/serv delivered
   * Cash occur first then the economic event

Question 4

Accrual Accounts

Answer 4

1. good/service provided –> A/R accrued –> cash received

OR

2. good/service received –> A/P accrued –> cash paid
   * economic event appears first, then the cash later

Question 5

CASH to ACCRUAL

Answer 5

ADD Beg. Liab, SUBTRACT Ending Liab.

SUBTRACT Beg. Asset, ADD Ending Assets

+ BL, -EL
- BA, +EA