Describe the basic characteristics of the cash basis and the accrual basis of accounting
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July 13, 2020Case Analysis – Strategic Management
July 13, 2020Describe the basic characteristics of the cash basis and the accrual basis of accounting
This assignment will familiarize you with the need for adjusting entries. After completing this assignment, you will understand:
- The difference between the cash and accrual bases of accounting.
- The concept of adjusting entries and how they are prepared.
- How to classify adjusting entries.
- The concept of asset depreciation and its effect on book values.
Instructions
Respond to the following questions or problems using grammatically correct language and appropriate APA citations. To achieve a proficient grade in this assignment, answer the proficient-level queries for each question. To achieve a distinguished grade, answer both sets of queries for each question.
- Question 1:
- Proficient:
- Describe the basic characteristics of the cash basis and the accrual basis of accounting.
- How are revenues and expenses reported on the income statement under the cash basis of accounting and the accrual basis of accounting?
- Distinguished:
- What differences exist when assets, liabilities, and equities are recorded under each of the two bases of accounting?
- Question 2:
- Proficient:
- Which events during an accounting period trigger the recording of normal journal entries and which event triggers the making of adjusting entries? Please explain why adjusting entries are necessary at the end of an accounting period.
- Distinguished:
- Identify the four different types of adjusting entries frequently required at the end of an accounting period.
- Question 3:
- Proficient:
- Give an example of an adjusting journal entry for each of the following transactions. Provide three correct responses:
- Equal growth of an expense and a liability.
- Earning of revenue that was previously recorded as unearned revenue.
- Equal growth of an asset and revenue.
- Increase in an expense and decrease in an asset.
- Distinguished:
- Give an example of an adjusting journal entry for each of the transactions. Provide four correct responses.
- Question 4:
- Proficient:
- Classify the following items as (a) prepaid expense, (b) unearned revenue, (c) accrued revenue, or (d) accrued expense. Provide six or seven correct responses:
- A three-year premium paid on a fire insurance policy.
- Fees earned but not yet received.
- Fees received but not yet earned.
- Salary owed but not yet paid.
- Subscriptions received in advance by a magazine publisher.
- Supplies on hand at the end of an accounting period.
- Taxes owed but payable in the following accounting period.
- Utilities owed but not yet paid.
- Distinguished:
- Classify the items mentioned as (a) prepaid expense, (b) unearned revenue, (c) accrued revenue, or (d) accrued expense. Provide eight correct responses.
- Question 5:
- Proficient:
- Describe the difference between depreciation expense and accumulated depreciation.
- Describe the formula used for computing the straight line depreciation for a depreciable asset. Explain how to calculate an asset’s book value.
- Distinguished:
- The balance in the equipment account is $1,375,000, and the balance in the accumulated depreciation—equipment account is $725,000.
- What is the book value of the equipment and does that amount mean that the equipment has a loss in real value of $725,000? Explain your response.
Write your responses in a Microsoft Word document and submit it as an attachment in the assignment area. Prior to submitting your assignment, review the Adjustments for Financial Reporting Scoring Guide to ensure you have met all of the requirements and as a self-assessment of your work. Be sure to address the questions at the proficient and distinguished levels to achieve the highest grade possible.
Note
: Your instructor may also use the Writing Feedback Tool to provide feedback on your writing. In the tool, click the linked resources for helpful writing information
Assignment 2
- COMPLETING THE ACCOUNTING CYCLE
Resources
Completing the Accounting Cycle Scoring Guide.
APA Style and Formatting.
Writing Feedback Tool.
-
This assignment will familiarize you with the remaining steps in the accounting cycle. After completing this assignment, you will understand:
- How to use the worksheet to summarize and complete the accounting cycle steps.
- The purpose and steps in the closing process at the end of an accounting period.
- How a classified balance sheet is prepared.
- How to use the current ratio as a tool for financial analysis.
Instructions
Respond to the following questions or problems using grammatically correct language and appropriate APA citations. To achieve a proficient grade in this assignment, answer the proficient-level queries for each question. To achieve a distinguished grade, answer both sets of queries for each question.
8.
Question 1:
·
Proficient:
§
You have taken over a set of accounting books for a small business as a part-time job. At the end of the first accounting period, you have partially completed the work sheet by entering the proper ledger accounts and balances in the Trial Balance columns. You turn to the manager and ask, “Where is the list of additional information I can use in entering the adjusting entries?†The manager indicates there is no such list. In all the text problems you have done, you have always been given this information. How would you obtain the information for this real-life situation?
·
Distinguished:
§
What are the consequences of not making all of the required adjustments at the end of the accounting period?
9.
Question 2:
·
Proficient:
§
After the Adjusted Trial Balance columns of a work sheet have been totaled, which account balances are extended to the Income Statement columns, the Statement of Retained Earnings columns, and the Balance Sheet columns?
·
Distinguished:
§
Describe how is the statement of retained earnings prepared.
10.
Question 3:
·
Proficient:
§
Describe, in order, the four basic steps in the closing process performed at the end of each accounting period.
§
Explain why the closing process is so important.
·
Distinguished:
§
After the closing process has been completed, what account types remain open?
11.
Question 4:
·
Proficient:
§
Describe how a classified balance sheet is different from a basic unclassified balance sheet.
§
List the major categories of accounts that would appear under assets, liabilities, and stockholder’s equity on a classified balance sheet.
·
Distinguished:
§
Rearrange the following steps in the accounting cycle in proper order:
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Financial statements are prepared.
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An adjusted trial balance is prepared.
§
Adjustment data are assembled and analyzed.
§
Adjusting entries are journalized.
§
Closing entries are journalized and posted to the ledger.
§
An unadjusted trial balance is prepared.
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Transactions are posted to the ledger.
§
Transactions are analyzed and recorded in the general journal.<div style="margin-left: 180.0pt; mso-list: l2 level5 lfo4; tab-stops: list 180.0p
