GAAP And Accrual Accounting

Question 1

How do you convert from Cash to Accrual Accounting?

Answer 1

ADD beginning liability balances and SUBTRACT ending liability balances

SUBTRACT beginning asset balances and ADD ending asset balances

Question 2

How do you convert from Accrual to Cash Accounting?

Answer 2

SUBTRACT beginning liability balance and ADD ending liability balance

ADD beginning asset balance and SUBTRACT ending asset balance

Question 3

Prepaid Expenses are classified as…

Answer 3

Assets because it is paid in advance creating a benefit beyond the current period

Question 4

Unearned Revenues are classified as…

Answer 4

Liabilities because cash is received from a customer for goods and services to be provided in a future period.