Accounting Adjustments

Accounting Adjustments
  • From the e-Activity, explain the major advantages and disadvantages inherent in using both the cash and the accrual basis of accounting, and determine the one (1) that you believe provides the most useful financial information to users. Identify at least two (2) types of businesses that would benefit by preparing financial statements using either the cash or accrual basis of accounting. Justify your response.
  • Define the generally acceptable accounting principles that justify making adjusting entries, and speculate on the primary impact to investors and creditors if companies did not make adjusting entries until the end of the calendar or fiscal year.

 

 

 

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Accrual accounting has some advantages and disadvantages. It is more popular than cash basis accounting since it is more accurate and has more faithful financial statement. This is because it records both revenues and expenses same time. It also produces an accurate gauge of entities performance of any given period of time (Tracy, 2013). On the other hand, accrual basis accounting has some disadvantages. It requires…

APA

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