| A | B |
|---|
| Cash Basis Accounting | Recognize Rev when cash rec'd; Recognize Exp when cash paid; Not GAAP |
| Accrual Basis Accounting | Recognize Rev when earned; Recognize Exp when incurred; GAAP; Rev recognition/Matching Principles |
| Adjusting Entries | classified as deferrals (prepayments) or accruals; 1 BS/IS |
| Deferred (prepaid) expenses | paid in cash and recorded as assets until used or consumed |
| Deferred (unearned) revenues | received in cash and recorded as liabilities until earned |
| Accrued expense (liability) | have been incurred, but cash has not yet been paid |
| Accrued revenue (asset) | has been earned, but not yet received in cash or recorded |
| Accounting Cycle 1 | Analyze transactions |
| Accounting Cycle 2 | Journalize transactions |
| Accounting Cycle 3 | Post transactions to ledger accounts |
| Accounting Cycle 4 | Prepare trial balance |
| Accounting Cycle 5 | Journalize and post adjusting entries |
| Accounting Cycle 6 | Prepare adjusted trial balance |
| Accounting Cycle 7 | Prepare financial statements |
| Accounting Cycle 8 | Journalize and post closing entries |
| Accounting Cycle 9 | Prepare post-closing trial balance |
| Close revenue accounts | debiting them and crediting Income Summary |
| Close expense accounts | crediting them and debiting Income Summary |
| Close Income Summary | to Retained Earnings |
| Close dividends account | crediting it and debiting retained earnings. |
