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Week 3 - Learning Team Assignment(1)

Week 3 - Learning Team Assignment(1) - Exercise32(a ....

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Exercise 3-2 (a)  Accrual-basis accounting records the transactions that change a company’s financial  statements in the periods in which the events occur rather than in the periods in which the  company receives or pays cash.  Information presented on an accrual basis is useful because it  reveals relationships that are likely to be important in predicting future results.  Conversely,  under cash-basis accounting, revenue is recorded only when cash is received, and an expense  is recognized only when cash is paid.  As a result, the cash basis of accounting often leads to  misleading financial statements. (b) Politicians might desire a cash-basis accounting system over an accrual-basis system because  if an accrual-accounting system is used, it could mean that billions in government liabilities  presently unrecorded would have to be reported in the federal budget immediately.  The  recognition of these additional liabilities would make the deficit even worse.  This is not what  politicians would like to see and be held responsible for. (c) Dear Senator, Currently, the Federal Government uses a cash-basis system rather than an accrual-basis  accounting system.  There must be billions of dollars in liabilities hidden in contracts that have  not been recorded, as they have not been paid.  While this would dramatically increase the  deficit at lease the American people would have a more accurate picture of what our  government owes or should be receiving. Sincerely, Team C
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P3-2A (a) J1 DATE Account Titles and Explanation Ref. Debit Credit Aug. 31 Insurance Expenses ($400 x 3)…………………… 722 1,200      Prepaid Insurance………………………………….130 1,200          31 Supplies Expenses ($3,300 - $600)…………….. 631 2,700      Supplies…………………………………………………. 126 2,700          31 Depreciation Expense-Cottages……………….. 620 1,500   ($6,000 X  ¼ )      Accumulated Depreciation Cottages…….144 1,500         31 Depreciation Expense-Furniture………………..
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