ACC-291, Chapter 4 4 Class Questions

1. Accrual accounting is required under U.S. GAAP. One of the main principles of accrual
accounting is the Matching Principle, also known as the Revenue Recognition
Principle and the Expense Recognition Principle. Pick one of these and describe
it. Why is it important?

2. How would you describe the difference between cash basis accounting and accrual basis
accounting? What types of companies are required to use accrual basis of
accounting? Are there any companies that can use cash basis accounting?

3.Every time a company prepares financial statements, adjusting entries are required.
Generally, financial statements are prepared at the end of each month, the end
of each quarter and at the end of each year. There are two categories of
adjusting entries: Accruals and Deferrals. Pick one of the adjusting entries
(Prepaid expenses, unearned revenues, accrued revenues or accrued expenses),
indicate whether it is an accrual or deferral, explain why it is important and
provide an example.

4.Step 6 in the accounting cycle is to prepare an adjusted trial balance. Just to review,
we are working through the accounting cycle. We have been discussing the
following steps: 1: Analyze business transactions, 2: Journalize the
transactions, 3: Post the journal entries to ledger accounts, 4. Prepare a
trial balance, 5. Journalize and post adjusting entries for deferrals/accruals,
6. Prepare an adjusted trial balance. How would you explain the purpose of the
adjusted trial balance to someone who knew nothing about it?

Each can be 60-70 words

 

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