For anyone

RESPOND TO THESE STUDENT POST

Jim post

Generally Accepted Accounting Principles (GAAP), overlooks and makes the rules and regulations on how the financial statements should be prepared. These are the rules, standards, and procedures that every public trading company must followed. GAAP helps the investors see how the company’s finances are doing, if they are interested in buying into the company. It would be difficult to make a decision if the company is not using the GAAP format and it can cost the business to heavy loss. Matching Principle and accrual basis accounting go hand in hand. They both record revenue when it happens, even if money has not been exchanged. Typically, this is used by a big corporation. On the other hand, cash basis accounting records the revenue when cash has been exchanged. Small mom and pop company’s use this type method.   

Derek post

There are four types of adjustment that can be made at the end of the accounting period. Adjustments that are made at the end of the accounting period reflects transactions or events that have not been recorded yet. The four type are, deferral of expense, deferral of revenue, accrued expense and accrued revenue. The adjustment entry affects multiple accounts, but never the cash account.

Adjusting entries are important, because they contribute, for example, when you have received cash in advance for services provided, unearned revenues are liabilities. When services are provided, liabilities decrease and unearned becomes earned, which in turn increases the revenues on the income statement.

Accrual basis accounting, is when services and products are delivered and records expenses when incurred (matched with revenue) per what the text states. In my own words, this seems similar to the accounting equation. Assets=Liabilities+Equity. So accrual basis to me is when your assets is equal to or greater then the amount of revenue coming in.

Cash basis accounting, per the text is cash basis income is cash receipts minus cash payments. To me this means the amount of cash flow coming in with out calculating what going out.