CHAPTER 33

Question 1

What’s the main difference between accrual and cash-basis accounting?

Answer 1

Accrual accounting records money when it’s earned or owed, not when paid. Cash-basis accounting records money only when it’s received or spent.

Question 2

When can revenue be recorded?

Answer 2

Revenue is recorded when it’s earned (work is done), realized (cash is received), or realizable (can be turned into cash soon).

Question 3

When do expenses get recorded in accrual accounting?

Answer 3

Expenses are recorded when they help bring in revenue, even if not paid yet.

Question 4

What are the four types of adjustments in accounting?

Answer 4

1) Prepaid Assets (paid early), 2) Unearned Revenue (paid but work not done), 3) Accrued Expenses (used but not paid yet), 4) Accrued Revenues (earned but not received yet).

Question 5

What are prepaid assets?

Answer 5

Items paid for in advance, like rent or insurance, which provide benefits in the future.