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Accepted Accounting Principles

2. State two generally accepted accounting principles that
relate to adjusting the accounts.
3. Rick Marsh, a lawyer, accepts a legal engagement in March,
performs the work in April, and is paid in May. If Marshâ??
law firm prepares monthly financial statements, when
should it recognize revenue from this engagement? Why?
4. Why do accrual-basis financial statements provide more
useful information than cash-basis statements?
8. Distinguish between the two categories of adjusting
entries, and identify the types of adjustments applicable to
each category.

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Dear student,
Answers to your four questions are provided in a separate word document attached supported by illustrations and power point slides for detailed explanation.

Question 2. State two generally accepted accounting principles that
relate to adjusting the accounts.
Answer to question 2:
GAAP include two important principles of accounting. They are Revenue recognition and Matching principles. Revenue Principle requires that companies should record revenue when it is (1) realized or realizable and (2) earned.It is not necessary that cash is received. This method of accounting is called Accrual Basis Of Accounting.
Revenue recognition principal states that the revenue is recognized when income is actually earned. The basic principal of revenue recognition is that income should be earned and its collectibility should be assured.
Most of the business enterprises use accrual basis of accounting. In accrual accounting revenue is recognized when it is actually earned whether actually received or notMatching principle states that expenses have to be matched with revenues as long as it is reasonable to do so. Expenses are recognized not when the work is ...

Solution Summary

The accepted accounting principles are examined.

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