Question

Please complete the following discussion questions:

1- Explain the difference between cash and accrual accounting

2- Explain why net income results in an increase in owner’s equity?

2- What are the enhancing qualitative characteristics of financial information?

Answer 1

Answer : 1) the difference between cash and accrual Accounting is in case of cash basis Accounting revenue/expenses are recognised only when they realised/incurred

In case of accrual Accounting revenue/expenses are recognised when they accured/incurred regard less of actual cash

For example : when a salary employee salary accure upto date of work done that is number of days done but realised only in month end

2) net income if it positive that is that is

total revenue - expenses = positive

Will result in increase in increase in retained earnings it will also results in increase in owners/stockholders equity

3) the enhancing qualitative characteristics of financial information will improve decision usefulness of financial reports

Some of the characteristics are timeliness,comparability, understandability,and verifyability

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