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Chapter 3 Weekly Discussion

Chapter 3 Weekly Discussion

Q Chapter 3 - Weekly Discussion 1. Explain the difference between accrual basis and cash basis accounting? Which one is GAAP accepted? 2. What are adjusting entries? Give at least two different examples of adjusting entries. RUBRIC: **5 points are awarded for a post that correctly and the answer with proper punctuation and grammar. This post is typically is a full paragraph with at least 5-8 sentences. Sources, including textbook, are cited. **3 points are awarded for a post that is "mostly" correct and complete with proper punctuation and grammar. This post is typically close to a full paragraph with at least 3-5 sentences. **1 point is awarded for a post that is incorrect and/or incomplete. **0 points are awarded to those that do not answer the question

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Accrual basis is when revenues are recorded when products or services are delivered, and records expenses when incurred. Cash basis is when revenues are recorded when cash is received, and expenses are recorded when cash is paid. The GAAP accepts both, however it is preferred to use accrual basis as it better reflects business performance. An adjusting entry is made at the end of an accounting period to reflect a transaction or event that is not yet recorded. An example of this would be adjusting prepaid insurance at month end. This is because the part of the insurance in no longer prepaid but in an expense.