– Can you give a bit more explanation of adjusting entries and also give an example to

support? The three items you have listed in the last case are good; however, there are more. As a class can we help list these out?

W1 D3 Cash versus Accrual & Financial Disclosure

Accrual accounting model measure the revenues (company’s accomplishments) and expenses during given period, notwithstanding of when cash is received or paid.  Alternatively, Cash basis accounting creates a measure of period by using net operation cash flows report.  The measurement is the differences between cash receipts and cash disbursements during period reported from transactions to relate to the services and good to customers.  Ordinarily, the accrual account model delivers a clearer measure of performance. This model attempts to show the gain and losses that were incurred over the year, which usually doesn’t correspond to cash flows report.  Adjusting entries, generally, are conversion from cash to accrual. 

          To identify the items in statement that almost certainly required to disclose in future, note, or policy note.

                   Accounts Receivable is to disclosure on the face of statement of allowance for uncollectible accounts.

                   Inventories require cost method used to be noted in accounting policy.  Furthermore, a manufacturer, note disclosure of the beginning inventory into raw materials, work in process and finished goods.

                   Long term liabilities have to disclosure in note of various debt instruments comprising long term liabilities to include information such terms of payment, interest rates, and collateral pledged as a security for debt.

References:

Spiceland, J. D., Sepe, J. F. & Nelson, M.W. (2011). Intermediate Accounting (6th ed.). New York, N.Y.: McGraw-Hill Irwin.

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