Explain the accrual basis of accounting and compare it with the cash basis of accounting. What are the advantages and disadvantages of each method? Which method is more commonly used in business and why?

Explain the accrual basis of accounting and compare it with the cash basis of accounting. What are the advantages and disadvantages of each method? Which method is more commonly used in business and why?

College Accounting (Book Only): A Career Approach

13th Edition

ISBN:9781337280570

Author:Scott, Cathy J.

Publisher:Scott, Cathy J.

Chapter5: Closing Entries And The Post-closing Trial Balance

Section: Chapter Questions

Problem 8DQ

See similar textbooks

Related questions

Q: How do international accounting standards and cultural differences impact financial reporting…

A: Accounting standards refer to a set of principles, rules, and guidelines that are established by…

Q: Journalize the transactions Read the instructions properly

A: An accounting system's journal entry is a record of a financial transaction. It is used to document…

Q: Soler Company uses the periodic method to account for inventory. At the beginning of the year, Soler…

A: INVENTORY VALUATION Inventory Valuation is a Method of Calculation of Value of Inventory at the End…

Q: Eva received $70,000 in compensation payments from JAZZ Corporation during 2022. Eva incurred $9,500…

A: Tax Liability - Tax liability is the total amount of tax that people and companies owe to the…

Q: Assume the following information for Kingbird Corp. Accounts receivable (beginning balance)…

A: The allowance for doubtful accounts is created to record estimated bad debt expense for the period.…

Q: You have been appointed to assist the accountant of Catalyst (Pty) Ltd to prepare the financial…

A: Adjusting entries are accounting entries that are made at the end of an accounting period to update…

Q: Garden Depot is a retailer that is preparing its budget for the upcoming fiscal year. Management has…

A: CASH BUDGET A cash budget is a forecast of expected cash revenues and disbursements over the…

Q: Enscoe Enterprises, Incorporated (EEI) has 240,000 shares authorized, 210,000 shares issued, and…

A: The worth of a company's stock seems to be an essential indicator that investors, experts, and other…

Q: help with below question Three different companies each purchased trucks on January 1, Year 1, for…

A: “Since you have posted a question with multiple sub-parts, we will provide the solution only to the…

Q: Wells Technical Institute (WTI), a school owned by Tristana Wells, provides training to individuals…

A: An adjusting entry is a type of journal entry made at the end of the year to recognize expenses and…

Q: The MID function in Excel requires how many arguments?

A: The MID function in Excel is used to extract a specific number of characters from a text string. It…

Q: Flynn acquires 100 percent of the outstanding voting shares of Macek Company on January 1, 2020. To…

A: Acquisition is the process which is followed by a firm when it acquired other company and hold all…

Q: Revenue Technician wages Mobile lab operating expenses office expenses Advertising expenses…

A: preparation of performance budget performance showing revenue , spending variance and activity…

Q: Data table Budgeted total sales, all on account Budgeted direct materials to be purchased and used…

A: Balance Sheet is the financial statement that records all the assets, liabilities and stockholders'…

Q: Owens sells computers. He purchases the computers for $460 each and incurs $6,000 in fixed operating…

A: VARIABLE COST Variable Cost is a cost that varies with the level of output. variable costs include…

Q: Joel can purchase a new car for $25,000. Alternatively, in addition to a down of $2,400, Joel can…

A: Lease options does not require any initial investment and equipment can be used with monthly…

Q: IF you invested K10, 000 in Microsoft 10 years ago, and that your shares (including reinvested…

A: The annualized rate of return is a financial metric that measures the average annual gain or loss on…

Q: The covariance between the returns on two stock is 1. The standard deviations of stocks A and B are…

A: The correlation coefficient between two assets can be calculated as follows: Correlation coefficient…

Q: why does the customer satisfaction rating decline when the contribution margin of the company…

A: The answer for the question on Contribution margin and Customer satisfaction rating has been given…

Q: The financial balances for the Atwood Company and the Franz Company as of December 31, 2020, are…

A: Investments are defined as the resources in which an individual put money to build wealth. The…

Q: Click here to view factor tables. How would Wildhorse (lessor) and Windsor (lessee) classify this…

A: Introduction At the conclusion of the lease period in a finance leasing arrangement,…

Q: The Converting Department of Comfy Touch Towel and Tissue Company had 680 units in work in process…

A: Answer:- Equivalent units:- Equivalent unit quantify the amount of work put into a set quantity of…

Q: Wildbird Construction has the following account balances at the end of the year. Accounts…

A: Balance Sheet - Balance sheet is a financial statement that includes Assets, Liabilities and…

Q: The following facts apply to the pension plan of Ivanhoe Inc. for the year 2023. Ivanhoe applies…

A: The pension expenses are the liability of the employers regarding the pension payable to the…

Q: Peru Industries began operations on January 1, 2023. During the next two years, the company…

A: Journal Entry :— It is an act of recording transaction in books of account when transaction…

Q: A restaurant has three main products: drinks, meals and desserts. Fixed costs are $397,000. Other…

A: Here we need to calculate the sales that are needed to achieve a profit of $200,000 on an assumption…

Q: Leader Corporation manufactures two products: Product Alfa and Product Beta. The company uses a…

A: Plant-wide overhead rate :— It is calculated by dividing total estimated overhead cost by estimated…

Q: On January 1, 2023, Sheffield Corporation purchased 20% of the common shares of Martz Limited for…

A: Investment refers to the asset which is acquired by the investor for the motive of generating income…

Q: Compute cost of goods sold, assuming Kingbird uses: (Round average cost per unit to 4 decimal…

A: Cost of Goods sold - (a) Periodic System , Fifo Cost flow $226,000.00 (b)…

Q: Handy Hiking produces backpacks. In the previous year, its highest and lowest production levels…

A: The question is based on the concept of Cost Accounting. Variable cost is the cost that remains same…

Q: During its first five years of operations, White Consulting reports net income and pays dividends as…

A: Retained earnings are the balance of accumulated profit earned during the life of the business after…

Q: You borrow $ 29429 at 12.25 % interest compounded monthly. If you are unable to make any payments…

A: The amount owing denotes the total of all debt that the business entities are required to pay,…

Q: On June 1, Bramble Inc. issues 3,600 shares of no-par common stock at a cash price of $9 per share.…

A: Journal Entry :— It is an act of recording transaction in books of account when transaction…

Q: On January 1, 2023, Sheridan Corp. issued $1.155 million of five-year, zero-interest-bearing notes…

A: Solution : Journal entry : Date Account titles & explanation Debit $ Credit $ January…

Q: The information below relates to the Cash account in the ledger of Waterway Company. Balance…

A: Bank reconciliation is defined as a process associated with matching the cash balance that prevails…

Q: Healthy Earth Products Inc. produces fertilizer and distributes the product by using company trucks.…

A: Predetermined Overhead Rate :— It is the rate used to allocate manufacturing overhead to cost…

Q: Pharoah Inc., a greeting card company, had the following statements prepared as of December 31,…

A: A cash flow statement gives information on all cash inflows a business makes from current activities…

Q: During 2021 Erin received eligible dividends of $1,000

A: Eligible dividends are paid out by public corporations , from the income that has been…

Q: Tamarisk Company is constructing a building. Construction began on February 1 and was completed on…

A: Note : A weighted average interest rate is the average rate which reflects the contribution of each…

Q: The financial reporting carrying value of Boze Music's only depreciable asset exceeded its tax basis…

A: Deferred tax: It implies to the tax payable or receivable in the future as a result of the…

Q: Carla Vista Construction Company has entered into a contract beginning January 1, 2025, to build a…

A: The percentage of completion method recognizes the gross profit on the basis of percentage of the…

Q: What does “limitations of internal control” mean? Provide examples of limitations that are inherent…

A: Internal controls: These include the rules, regulations, and mechanisms that are used by the…

Q: Assume that only one product is being sold in each of the four following case situations: Units sold…

A: Contribution margin statement is the one wherein the variable and fixed expenses are differentiated…

Q: Required information [The following information applies to the questions displayed below] The…

A: JOINT PRODUCT Joint products are the result of utilization of the same raw material and same…

Q: Use attachment to answer the following Assume all assets are operating assets; all current…

A: Formukla used: Return on net operating assets=Net incomeNet operating assets×100

Q: A machine with a cost of $148,000 and accumulated depreciation of $94,000 is sold for $68,000 cash.…

A: Introduction: Sale of machine is an investing activity and will be appeared in the cash flows from…

Q: This year Diane intends to file a

A: Modified adjustable income= Salary - Moving expenses - Alimony paid

Q: The following information pertains to Camp Corp's issuance of bonds on July 1, 20X5: Face amount…

A: Solution: Correct answer : (d) $807 Present value of bond for 10 years @ 9% = $ 1000 * 0.422 = $ 422…

Q: Which of the following industries would you expect to have the longest operating cycle?

A: The operating cycle, also known as the cash conversion cycle, is a measure of the time it takes for…

Q: Alyeski Tours operates day tours of coastal glaciers in Alaska on its tour boat the Blue Glacier.…

A: Alyeski Tours Flexible Budget For the Month Ended July 31 Number of Cruises…

Question

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: Introduction:

VIEW

Step 2: Explanation:

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

What is the accounting equation? List two examples of business transactions, and explain how the accounting equation would be impacted by these transactions.
Which of the following statements is true? Under cash-basis accounting, revenues are recorded when a company satisfies its performance obligations and expenses are recorded when incurred. Accrual-basis accounting records both cash and noncash transactions when they occur. Generally accepted accounting principles require companies to use cash-basis accounting. The key elements of accrual-basis accounting are the revenue recognition principle, the expense recognition principle, and the historical cost principle.
how will a change from cash basis accounting to accural basis accounting positively and negatively affect the business reporting?
Distinguish between cash-basis accounting and accrual basis accounting. Why is accrual-basis accounting acceptable for most businesses and the cash-basis unacceptable in the preparation of an income statement and a balance sheet?
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?