Question

Do the adjusting and reversing entries align more with the cash or accrual basis of accounting? Why or why not?

Answer 1

ADJUSTING ENTRY IS DONE TO MATCH THE EXPENSES AND INCOME IN THE SAME PERIOD.

FOR EXAMPLE:

ACCRUED OR DEFFERED EXPENSES, REVENUES, NON CASH TRANSACTIONS ETC.

THIS IS REQUIRED WHEN ACCRUAL BASIS OF ACCOUNTING IS FOLLOWED.

IT IS NOT DONE IN CASH BASIS OF ACCOUNTING BECAUSE ITS RECORDED ONLY WHEN CASH RECEIVED OR PAID.

REVERSING ENTRY MAY BE SOMETIME TO CORRECT THE MISTAKES DONE IN RECORDING OF THE TRANSACTIONS.

THIS MAY BE REQUIRED UNDER BOTH TYPE OF ACCOUNTING BASIS.