Accrual Accounting Flashcards
1
Q
What is accrual accounting?
A
Recognizing and reporting economic activity in the period the activity was incurred regardless of when cash was collected.
2
Q
Formula convert cash basis to accrual basis expenses
A
Cash basis -Ending prepaid expense -Beginning accrued expense \+Beginning prepaid expense \+Ending accrued expense = Accrual basis
3
Q
Equation - Ending Accrual basis purchases
A
Beginning AP + Accrual Purchases - Cash payments = Ending AP
4
Q
General rule for converting cash to accrual
A
The general rule to convert from cash to accrual is to add decreases in liabilities and increases in assets, and subtract increases in liabilities and decreases in assets.
5
Q
Equation - convert accrual to cash
A
Isolate Cash!
Change in L + Change in E - Change in other A
6
Q
Equation - convert cash to accrual
A
Isolate equity!
Change in A - Change in L = Change in Equity.
