The Accounting Cycle: End of the Period

Question 1

What is a preliminary Trial Balance?

Answer 1

A trial balance is a list of all accounts and their balances at a particular, date showing that total debts equal total credits.

Another purpose of the trial balance is to assist us in preparing and adjusting entries.

After posting the journal entries to the general ledger accounts, the sum of the accounts with debit balances should equal the sum of the accounts with credit balances.

Question 2

Accrual Basis of Accounting v. Cash Basis

Answer 2

Accrual : net income and net cash flows from operating activities may be significantly different.

Cash basis: Net income and net cash flows from operating activities are equal

Question 3

Under Accrual-Basis Accounting, when do we record, Assets?

Answer 3

Under accrual basis accounting we record assets at the time the resources are obtained.

Question 4

Under Accrual-Basis Accounting, when do we record, Liabilities?

Answer 4

Under accrual basis accounting we record liabilities at the time the obligations occur.

Question 5

Under Accrual-Basis Accounting, when do we record, Revenues?

Answer 5

Under accrual basis accounting we record revenues at the time goods and services are provided to the customers.

Question 6

Under Accrual-Basis Accounting, when do we record, Expenses?

Answer 6

Under accrual basis accounting we record the expenses at the time costs are USED in running the company.

Question 7

What is the question to ask yourself to help find when we record an item under accrual basis accounting?

Answer 7

1. When did the true economic event happen?
   - Adjustments are used to achieve “Accrual-Basis”