Why do accrual-basis financial statements provide more useful information than cash- basis statements?

Accrual-basis financial statements provide more useful information than cash-basis statements because they reflect the economic reality of a
business’s transactions by matching revenues earned and expenses incurred in a given period, regardless of when cash is received or paid. This
allows for a more accurate depiction of a company’s financial performance and position, as it provides a more complete picture of its income
and expenses, including those that may not involve actual cash transactions.

What components of revenues and expenses are different between merchandising and Servitransactions?

The components of revenues and expenses that are different between merchandising and service companies include: Revenue for a
merchandising company includes the sale of goods, whereas revenue for a service company includes fees for services rendered. Cost of goods
sold is a significant expense for a merchandising company, but not for a service company. Merchandising companies typically have inventory,
whereas service companies do not.

When is cost of goods sold determined in a perpetual inventory system?

In a perpetual inventory system, cost of goods sold is determined each time a sale is made. This is because the inventory account is updated
continuously as purchases and sales are made, providing an accurate and up-to-date record of the cost of goods sold.

Identify and describe the steps in the accounting process.

 Analyze transactions and identify the accounts affected.

How Principle of duality supports Accounting Equation Concept”? What are the base elements of Accounting Equation?

The principle of duality, also known as the duality principle of accounting, states that every transaction has two aspects, a debit, and a credit,
which must be recorded simultaneously in the accounting system. This principle is also known as the double-entry accounting system. The
principle of duality is essential because it ensures that the accounting equation always remains in balance.

The accounting equation is the foundation of the accounting system and represents the relationship between a company’s assets, liabilities,
and equity. The equation is expressed as: Assets = Liabilities + Equity

The base elements of the accounting equation are:

 Assets: These are the resources owned by the company that can provide future economic benefits. Examples of assets include cash,
inventory, property, plant, and equipment, accounts receivable, and investments.
 Liabilities: These are the company’s obligations to pay its creditors or other entities. Examples of liabilities include accounts payable,
loans payable, wages payable, and taxes payable.
 Equity: This is the residual interest in the assets of the company after deducting liabilities. Equity represents the ownership interest
of the shareholders in the company. Examples of equity include common stock, retained earnings, and accumulated other
comprehensive income.

The principle of duality ensures that every transaction recorded in the accounting system affects at least two accounts, one account is debited,
and the other account is credited, and the total debits always equal the total credits. This principle ensures that the accounting equation
remains in balance and provides the foundation for the preparation of accurate financial statements.

What are the steps in the accounting cycle? Provide a brief description of each step.

The accounting cycle is the process that accountants follow to record, classify, and summarize financial transactions of a business. The steps
include: identifying and analyzing transactions, journalizing, posting to the ledger, preparing a trial balance, making adjusting entries, preparing
an adjusted trial balance, preparing financial statements, making closing entries, and preparing a post-closing trial balance.

Define journalizing. How does journalizing help in the accounting process?

Journalizing is the process of recording transactions in a journal, which is the first step in the accounting cycle. Journalizing helps in the
accounting process by providing a chronological record of transactions that can be used to create financial statements and other reports.
What is a ledger? How is it different from a journal?

A ledger is a book or database that contains all of a company’s accounts and their balances. It is different from a journal in that it is a
permanent record that is used to keep track of account balances.

Define trial balance. How is it prepared, and what is its purpose?

A trial balance is a list of all the accounts in a company’s ledger and their balances. It is prepared to ensure that the total debits equal the total
credits, which verifies that the accounting equation is in balance.

What is the purpose of adjusting entries? Provide examples of adjusting entries.

Adjusting entries are made at the end of an accounting period to update accounts that were not recorded in the normal course of business,
such as depreciation, prepaid expenses, and accrued expenses. The purpose of adjusting entries is to ensure that the financial statements are
accurate and up-to-date.

Define closing entries. Why are closing entries necessary?

Closing entries are made at the end of an accounting period to transfer the balances of temporary accounts (revenues, expenses, and
dividends) to the permanent equity accounts. The purpose of closing entries is to reset the temporary accounts to zero and prepare them for
the next accounting period.

What is a post-closing trial balance? How is it prepared, and what is its purpose?

A post-closing trial balance is prepared after the closing entries have been made to ensure that all accounts have been properly adjusted and
closed. The purpose of the post-closing trial balance is to verify that the accounting equation is still in balance and that the company’s financial
statements are accurate.

Define the terms “account,” “debit,” and “credit.”

An account is a record of a specific financial transaction or item. Debit refers to the left side of an account, while credit refers to the right side of
an account. Debits and credits are used to record the effects of financial transactions on accounts.

What is the accounting equation? Explain how it relates to the balance sheet.

The accounting equation is Assets = Liabilities + Equity. It reflects the fundamental relationship between a company’s assets, liabilities, and
equity. The assets represent what the company owns, the liabilities represent what the company owes, and the equity represents the owner’s
claim to the assets.

Define the term “revenue” and provide examples of revenue accounts.

Revenue refers to the income that a company earns from the sale of goods or services. Examples of revenue accounts include sales revenue,
rental income, and interest income.

Define the term “expense” and provide examples of expense accounts

Expenses refer to the costs that a company incurs to earn revenue. Examples of expense accounts include salaries and wages, rent, utilities, and
advertising expenses..

What is the purpose of the income statement? What information does it provide?

The income statement is a financial statement that shows a company’s revenues and expenses over a specific period of time, usually a month
or a year. Its purpose is to show the company’s profitability by subtracting expenses from revenues to determine the net income or loss.

Current assets are those that are expected to be converted into cash within one year, while long-term assets are those that are expected to
provide economic benefit for more than one year.

Current liabilities are those that are due within one year, while long-term liabilities are those that are due in more than one year.