High School Finance Teacher

Accrual vs. money Basis Accounting Alicia Wiley Grantham University Abstract In this paper I have plantd accumulation and interchange terms accounting. Also, I have answered the following questions rationalise the unlikeness between the accrual basis of accounting and the capital basis of accounting. What argon the major(ip) reasons for employ accrual accounting? What ar the purpose of a journal and a al-Quran? Give an example of a contra- asset, and explain how it is recorded on the journal as a movement. Explain what a prepaid expenditure is and how it is recorded on the ledger as a act.What ar the major differences in recording exploits for a for-profit government versus a non-for-profit, or are there any? List and record each transaction for S. Zee Outpatient Clinic under the accrual basis of accounting at celestial latitude 31, 20X1, then develop a balance sheet as of declination 31, 20X1, and a statement of operations for the year ended celestial latitude 31, 20X1. How do capital structure rations and liquidity rations differ in providing insight into an governings ability to pay debt obligations?Identify and explain both situations where an transcription might have increasing use rations but declining profitability. Explain the difference between the accrual basis of accounting and the cash basis of accounting. What are the major reasons for using accrual accounting? Cash accounting and accrual accounting are 2 similar methods of maintaining accurate accounting records. eyepatch the two approaches share many aspects in common, there are two key differences that distinguish each method from the other.Essenti eithery, the difference between cash accounting and accrual accounting boils down to the way debits and credits are applied in the bookkeeping process. To understand the difference, it is first necessary to define each type of accounting process. Cash accounting, which is also known as cash basis accounting, allows for the recognition of income at the cartridge holder it is actually received. This kernel that invoiced income is not counted as an asset until payment for the invoice is actually in hand. The same approach is applied to debits, in that any expenses incurred are not osted until they are paid. In contrast, accrual accounting does recognize income at the date it is earned. As goods or services are invoiced, the invoices are stick on and counted as assets. They remain in this state until the face value of the invoice is attribute for some reason. In like manner, any expenses are also posted at the time they are incurred or an invoice for those expenses is received, and remains on the fence(p) until the expenses are paid. Most mid-level and large businesses today tend to rely on the use of the accrual method rather than cash accounting.Doing so allows a business to determine at a glance how much cash is in hand, how much is originally pending in outstanding invoices, and what cur subsc ribe expenses are awaiting payment. What are the purpose of a journal and a ledger? The purpose of the general ledger is to record all financial transactions for a company or person and total them on a net basis (plus accounts less minus accounts) for a real time frame according to a summary chart of accounts. The general ledger provides the important information necessary for the preparation of all basic reports compulsory by a company or individual.For example, the general ledger give allow the preparation of balance sheet reports and profit and loss reports for all accounting periods under review. This helps to explain why the general ledger is so important. daybook is used to record transactions in chronological outrank Give an example of a contra-asset, and explain how it is recorded on the ledger as a transaction? Contra-asset is an asset which, when increased, decreases the value of a related to asset on the books. An example of a contra-asset is the Allowance for Doubt ful Accounts, which is the contra asset to Accounts Receivable.Contra-asset would be recorded on the balance of the debit matched up against the contra-asset credit. Explain what a prepaid expense is and how it is recorded on the ledger as a transaction? A prepaid expense, such as rent or insurance, is a type of current asset. It is recorded by fall Cash and increasing the prepaid amount by the same amount. Thus, the transaction only occurs in the Asset section of the Balance Sheet, and it is a zero-sum transaction. What are the major differences in recording transactions for a for-profit organization versus a not-for-profit, or are there any?For-profit organization would record certain transactions under Owners Equity, whereas the Not-for-Profit would use Net Assets. Also, a for-profit would not show restrictions on Owners Equity. List and record each transaction for S. Zee Outpatient Clinic under the accrual basis of accounting at declination 31, 20X1, then develop a balance she et as of December 31, 20X1, and a statement of operations for the year ended December 31, 20X1. Journal Entries a Cash 3,000,000. 00 Un confine Contribution 3,000,000. 00 Equipment 2,000,000. 00 Cash 2,000,000. 00 c Cash 1,000,000. 00 Bank Loan 1,000,000. 00 d Supplies 1,500,000. 00 Cash 1,500,000. 00 e Accounts Receivable 5,500,000. 00 attend revenue enhancement 5,500,000. 00 f Supplies disbursement 1,000,000. 00 Supplies 1,000,000. 00 g Cash 500,000. 00 Unearned work Revenue 500,000. 00 h Labor Expenses 2,000,000. 00 Cash 2,000,000. 00 General Expenses 1,500,000. 00 Cash 1,500,000. 00 j Cash 4,500,000. 00 Accounts Receivable 4,500,000. 00 k Unearned service of process Revenue 300,000. 00 Service Revenue 300,000. 00 l Bank Loan 100,000. 00 Cash 100,000. 00 m evoke Expense 50,000. 00 Cash 50,000. 00 n Cash 100,000. 00 Restricted Donation 100,000. 00 o Depreciation Expense 200,000. 00 Accumulated Depreciation 200,000. 0 p injurious Debt Expense 500,000. 00 Accounts Receivable 500,000. 00 OPERATIONS SUMMARY Service Revenue 5,800,000. 00 slightExpenses Supplies Expense 1,000,000. 00 Labor Expenses 2,000,000. 00 General Expenses 1,500,000. 00 Interest Expense 50,000. 00 Depreciation Expense 200,000. 00 Bad Debt Expense 500,000. 00 5,250,000. 00 5,250,000. 00 Net Income from Operations 550,000. 00 BALANCE SHEET AS ON 31 Dec Assets Cash 1,950,000. 00 Equipment 2,000,000. 00 Supplies 500,000. 00 Accounts Receivable 500,000. 00 Total Assets 4,950,000. 00 Liabilities Un restricted Contribution 3,000,000. 00 Restricted Contribution 100,000. 00 Net Income 550,000. 00 Une arned Service Revenue 200,000. 00 Bank Loan 900,000. 00 Accumulated Depreciation 200,000. 00 Total Liabilities 4,950,000. 0 How do capital structure rations and liquidity rations differ in providing insight into an organizations ability to pay debt obligations? Liquidity is a companys ability to meet its maturing short-run obligations. Liquidity is important for conducting business activity especially in times of adversity such as when run losses occur due to economic conditions or drastic terms increases of raw materials or parts. Liquidity ratios show a companys ability to generate sufficient cash to meet its obligations. Liquidity moldiness be sufficient to cushion such losses.If not, serious financial difficulties whitethorn result. An indication of a companys ability to meet short-term debt obligations the higher the ratio, the more liquid the company is. Identify and explain two situations where an organization might have increasing activity rations b ut declining profitability. exertion rations help assess how effectively a company uses its assets. Reference Zelman, W. , McCue, M. , Millikan, A. , and Glick, N. 2009. fiscal Management of Health Care Organizations An Introduction to Fundamental Tools, Concepts, and Applications. 3e. Hoboken, NJ Wiley & Sons.