Basic Bookkeeping Instructor Guide
TABLE OF CONTENTS Preface ..............................................................................................................................................5 What is Courseware? ................................................................................................................................ 5 How Do I Customize My Course? .............................................................................................................. 5 Materials Required ................................................................................................................................... 7 Maximizing Your Training Power .............................................................................................................. 7 Module One: Introduction..................................................................................................................9 Housekeeping Items.................................................................................................................................. 9 The Parking Lot ....................................................................................................................................... 10 Workshop Objectives .............................................................................................................................. 10 Pre-Assignment Review .......................................................................................................................... 11 Module Two: Basic Terminology (I) ................................................................................................... 12 Balance Sheet ......................................................................................................................................... 12 Assets ...................................................................................................................................................... 14 Liabilities ................................................................................................................................................. 14 Equity ...................................................................................................................................................... 14 Income Statement................................................................................................................................... 14 Revenue .................................................................................................................................................. 15 Cost of Goods Sold .................................................................................................................................. 15 Expenses ................................................................................................................................................. 15 Accounting Period ................................................................................................................................... 15 Module Two: Review .............................................................................................................................. 16 Module Three: Basic Terminology (II) ............................................................................................... 18 Accounts Receivable ............................................................................................................................... 18
Accounts Payable .................................................................................................................................... 18 Depreciation ........................................................................................................................................... 19 General Ledger........................................................................................................................................ 19 Interest.................................................................................................................................................... 19 Inventory ................................................................................................................................................. 19 Journals ................................................................................................................................................... 20 Payroll ..................................................................................................................................................... 20 Trial Balance ........................................................................................................................................... 20 Module Three: Review ............................................................................................................................ 21 Module Four: Accounting Methods .................................................................................................. 23 Cash Method........................................................................................................................................... 23 Accrual Method ...................................................................................................................................... 24 Differences between Cash and Accrual .................................................................................................. 25 Module Four: Review Questions ............................................................................................................. 26 Module Five: Keeping Track of Your Business .................................................................................... 29 Accounts Payable .................................................................................................................................... 29 Accounts Receivable ............................................................................................................................... 31 The Journal.............................................................................................................................................. 33 The General Ledger ................................................................................................................................. 34 Cash Management.................................................................................................................................. 35 Module Five: Review Questions .............................................................................................................. 36 Module Six: Understanding the Balance Sheet .................................................................................. 38 The Accounting Equation ........................................................................................................................ 40 Double-Entry Accounting ........................................................................................................................ 41 Types of Assets........................................................................................................................................ 41 Types of Liabilities................................................................................................................................... 43
Equity ...................................................................................................................................................... 44 Module Six: Review Questions ................................................................................................................ 45 Module Seven: Other Financial Statements ...................................................................................... 47 Income Statement................................................................................................................................... 47 Cash Flow Statement .............................................................................................................................. 48 Capital Statement ................................................................................................................................... 49 Budget vs. Actual .................................................................................................................................... 50 Module Seven: Review Questions ........................................................................................................... 52 Module Eight: Payroll Accounting / Terminology .............................................................................. 54 Gross Wages ........................................................................................................................................... 54 Net Wages .............................................................................................................................................. 55 Employee Tax Withholding’s .................................................................................................................. 55 Employer Tax Expenses ........................................................................................................................... 55 Salary Deferrals ...................................................................................................................................... 55 Employee Payroll .................................................................................................................................... 56 Employee Benefits .................................................................................................................................. 56 Tracking Accrued Leave .......................................................................................................................... 56 Government Payroll Returns/Reports ..................................................................................................... 56 Module Eight: Review ............................................................................................................................. 57 Module Nine: End of Period Procedures ........................................................................................... 58 Depreciating Your Assets ........................................................................................................................ 58 Reconciling Cash ..................................................................................................................................... 59 Reconciling Investments ......................................................................................................................... 60 Working with the Trial Balance .............................................................................................................. 61 Bad Debt ................................................................................................................................................. 61 Posting Adjustments and Corrections ..................................................................................................... 62
Module Nine: Review Questions ............................................................................................................. 63 Module Ten: Financial Planning, Budgeting and Control .................................................................... 66 Reasons for Budgeting ............................................................................................................................ 66 Creating a Budget ................................................................................................................................... 67 Comparing Budget to Actual Expenses ................................................................................................... 68 Module Ten: Review Questions .............................................................................................................. 70 Module Eleven: Auditing .................................................................................................................. 72 What is an Audit? ................................................................................................................................... 72 When and Why Would You Audit? ......................................................................................................... 73 Internal ................................................................................................................................................... 74 External ................................................................................................................................................... 75 Module Eleven: Review Questions .......................................................................................................... 76 Module Twelve: Wrapping Up .......................................................................................................... 78 Words from the Wise .............................................................................................................................. 78 Parking Lot .............................................................................................................................................. 78 Action Plans and Evaluations.................................................................................................................. 78
Learning is a treasure that will follow its owner everywhere. Chinese Proverb Preface What is Courseware? Welcome to Courseware.com, a completely new training experience! Our courseware packages offer you top-quality training materials that are customizable, user-friendly, educational, and fun. We provide your materials, materials for the student, PowerPoint slides, and a take-home reference sheet for the student. You simply need to prepare and train! Best of all, our courseware packages are created in Microsoft Office and can be opened using any version of Word and PowerPoint. (Most other word processing and presentation programs support these formats, too.) This means that you can customize the content, add your logo, change the color scheme, and easily print and e-mail training materials.
How Do I Customize My Course? Customizing your course is easy. To edit text, just click and type as you would with any document. This is particularly convenient if you want to add customized statistics for your region, special examples for your participants’ industry, or additional information. You can, of course, also use all of your word processor’s other features, including text formatting and editing tools (such as cutting and pasting). To remove modules, simply select the text and press Delete on your keyboard. Then, navigate to the Table of Contents, right-click, and click Update Field. You may see a dialog box; if so, click “Update entire table” and press OK.
(You will also want to perform this step if you add modules or move them around.)
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If you want to change the way text looks, you can format any piece of text any way you want. However, to make it easy, we have used styles so that you can update all the text at once. If you are using Word 97 to 2003, start by clicking the Format menu followed by Styles and Formatting. In Word 2007 and 2010 under the Home tab, right-click on your chosen style and click Modify. That will then produce the Modify Style options window where you can set your preferred style options. For example, if we wanted to change our Heading 1 style, used for Module Titles, this is what we would do:
Now, we can change our formatting and it will apply to all the headings in the document. For more information on making Word work for you, please refer to Word 2007 or 2010 Essentials by Courseware.com.
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Materials Required All of our courses use flip chart paper and markers extensively. (If you prefer, you can use a whiteboard or chalkboard instead.) We recommend that each participant have a copy of the Training Manual, and that you review each module before training to ensure you have any special materials required. Worksheets and handouts are included within a separate activities folder and can be reproduced and used where indicated. If you would like to save paper, these worksheets are easily transferrable to a flip chart paper format, instead of having individual worksheets. We recommend these additional materials for all workshops:
Laptop with projector, for PowerPoint slides
Quick Reference Sheets for students to take home
Timer or watch (separate from your laptop)
Masking tape
Blank paper
Maximizing Your Training Power We have just one more thing for you before you get started. Our company is built for trainers, by trainers, so we thought we would share some of our tips with you, to help you create an engaging, unforgettable experience for your participants.
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Make it customized. By tailoring each course to your participants, you will find that your results will increase a thousand-fold. o
Use examples, case studies, and stories that are relevant to the group.
o
Identify whether your participants are strangers or whether they work together. Tailor your approach appropriately.
o
Different people learn in different ways, so use different types of activities to balance it all out. (For example, some people learn by reading, while others learn by talking about it, while still others need a hands-on approach. For more information, we suggest Experiential Learning by David Kolb.)
Make it fun and interactive. Most people do not enjoy sitting and listening to someone else talk for hours at a time. Make use of the tips in this book and your own experience to keep your
participants engaged. Mix up the activities to include individual work, small group work, large group discussions, and mini-lectures. 
Make it relevant. Participants are much more receptive to learning if they understand why they are learning it and how they can apply it in their daily lives. Most importantly, they want to know how it will benefit them and make their lives easier. Take every opportunity to tie what you are teaching back to real life.
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Keep an open mind. Many trainers find that they learn something each time they teach a workshop. If you go into a training session with that attitude, you will find that there can be an amazing two-way flow of information between the trainer and trainees. Enjoy it, learn from it, and make the most of it in your workshops.
And now, time for the training!
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The company accountant is shy and retiring. He’s shy a couple of million bucks, that’s why he’s retiring! Milton Berle
Module One: Introduction Numbers! Numbers! Numbers! Wherever you go, you are bound to see them. On addresses, license plates, phones, prices, and of course, money! Numbers connect us all to each other in many more ways than we might imagine. Essentially, our world revolves around numbers. Some of us enjoy dealing with numbers while others may have a fear of them, or even a phobia. For those of you who have already recognized and appreciate the impact that numbers actually have on just about everything, you deserve a cookie. Welcome to Basic Bookkeeping!
Housekeeping Items Take a few moments to cover basic housekeeping items.
If you need an opening or a way to introduce the participants to each other, utilize the Icebreakers folder to begin or between breaks during the day.
Let participants know where they can find washrooms, break facilities, and fire exits.
Ask participants to turn off their cell phones or at least turn them to vibrate. If they must take a call, request that they do it outside.
Take this time to encourage the group to ask questions and make this an interactive workshop.
Write the words Respect, Confidentiality, and Practice on a piece of flip chart paper and tape it to the wall. Explain to participants that in order to get the most out of this workshop, we must all work together, listen to each other, explore new ideas, and make mistakes. After all, that’s how we learn!
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The Parking Lot Explain the concept of The Parking Lot to participants.
The Parking Lot is a visible place where you will “park” ideas that arise which are not on the agenda, may be off topic, or are better addressed outside of the program.
At the end of the session, we will review parked ideas and follow up, or make suggestions for your own investigation when you are back at work.
Suggestions for the trainer: 1. If you are working with a large group of participants, you may wish to nominate a recorder to park items as you are facilitating. 2. It’s a good idea to note the name of the contributor along with the parked item. 3. Items noted on the parking lot can be useful to you later as you plan future training sessions.
Workshop Objectives Research has consistently demonstrated that when clear goals are associated with learning, the learning occurs more easily and rapidly. With this in mind, let’s review our goals for today. By the end of this workshop, participants will be able to:
Understand basic accounting terminology.
Identify the differences between the cash and accrual accounting methods.
Keep track of your business by becoming familiar with accounts payable and accounts receivable.
Use a journal and general ledger to document business financials.
Utilize the balance sheet.
Identify different types of financial statements.
Uncover the reasons for and actually create a budget.
Be familiar with internal and external auditing.
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Pre-Assignment Review The purpose of the Pre-Assignment is to get participants thinking about their current set of Basic Bookkeeping skills. You will also find a Pre-Assignment handout in the Activities folder. List three areas in relation to bookkeeping you feel you are strong. 1. ______________________________________________________________________________ ______________________________________________________________________________ 2. ______________________________________________________________________________ ______________________________________________________________________________ 3. ______________________________________________________________________________ ______________________________________________________________________________ List three areas in regards to bookkeeping where you would like to see improvement. 1. ______________________________________________________________________________ ______________________________________________________________________________ 2. ______________________________________________________________________________ ______________________________________________________________________________ 3. ______________________________________________________________________________ ______________________________________________________________________________
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A bank is a place that will lend you money if you can prove that you don’t need it. Bob Hope Module Two: Basic Terminology (I) So the good thing about accounting is that you can start out wherever you want, at the beginning, the middle, or the end and you will still wind up at the same place, nowhere (Just kidding). You really have to start at the beginning, or you will get lost. So let’s start there, with some basic terminology. Some of this stuff may ring a bell for those of you who took accounting previously, were hired to keep the books at the corner Mom & Pop’s shop, or, were too cheap to hire a “real Accountant” and tried to do your own books. (How did that work out for you?). Either way, when we are done here, you are bound to be familiar with a lot of these basic bookkeeping and accounting terms.
Balance Sheet A balance sheet is a financial statement that shows the assets, liabilities, and owner’s equity at a specific point in time. Assets and liabilities are usually listed first, followed by the equity which is the difference between the assets and the liabilities. The balance sheet will ultimately provide a snapshot of the company’s current financial condition.
Balance Sheet Business Title: Bob & Tom’s Crunchy Cookie Co.
Date:
Assets
Liabilities
Current Assets
$
Cash
$
Petty Cash
$
Accounts Receivable
$
Inventory
$
Current Liabilities
Accounts Payable Notes Payable Interest Payable Taxes Payable
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$_____________ $_____________ $_____________
Short-term Investments
$
Prepaid Expenses
$
Long-term Investments
Federal Income Tax $_____________ Self-Employment Tax $_____________ State Income Tax $_____________ Sales Tax Accrual $_____________ Property Tax $_____________
$
Payroll Accrual $_____________
Fixed Assets
Long-term Liabilities
(Valued at Cost)
$
Buildings 1. Cost ________________ 2. Less acc. Depr. _______
$
Improvements 1. Cost ________________ 2. Less acc. Depr. _______
$
Equipment 1. Cost ________________ 2. Less acc. Depr. _______
$
Furniture 1. Cost ________________ 2. Less acc. Depr. _______
$
Automobiles 1. Cost ________________ 2. Less acc. Depr. _______
$
Capitol Stock Surplus Paid in Retained Earnings
Other Assets 1. 2.
$
Total Net Worth
Land
Total Assets $
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$
Notes Payable
$_____________
Total Liabilities
$_____________
Net Worth (Equity) Proprietorship Or Partnership
$_____________
(Name) _______, _____% equity $_____________ (Name) _______, _____% equity $_____________
Or Corporation
$
$_____________ $_____________ $_____________ $_____________
Assets – Liabilities = Net Worth & Liabilities + Equity = Total Assets
Assets Assets are probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events. Anything that has an economic value and can be owned or controlled to produce value has the potential to produce such future economic benefits. Whether tangible or intangible, ownership of any form of value such as cash money or stock is considered to be an asset.
Liabilities Probable future sacrifices of income or assets, arising from present obligation to a particular entity. If liabilities are settled, they may become transferred assets or provide services to other entities in the future as a result of past transactions or events. A liability is a duty or responsibility to another in return for some form of debt such as a business loan which would entail the settlement of that loan.
Equity Ownership in assets after all debts owed for that asset has been paid off. Assets such as stock and home ownership can be considered equity if no associated debts remain. Once a house or automobile is paid off, the asset is now the owner’s equity. Equity is any asset that can be sold for monetary gain without any attached debts being owed. The owner should gain 100% of the revenue from the sale of an asset if that asset is his or her own equity.
Income Statement A financial statement is used to summarize the amounts of revenues earned, and the expenses incurred by a business or entity over a period of time. It is used to measure a business’s financial performance. This statement includes a summary of how a business typically incurs its revenues and expenses over a fiscal quarter or year.
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Revenue The fee paid to a lender for a loan or all transactions for which monies are received. It can be the income from products and services sold and the use of investments. Revenue can also be a transaction and the resulting income for which monies are received, however, loan funds and equity deposits are not considered revenue.
Cost of Goods Sold The cost of producing products that are delivered to customers to create revenue or the cost of inventory sold during an accounting period. This includes the cost of purchases made during an inventory period minus the ending inventory for that period. This term is often abbreviated as COGS.
Expenses Expenses are the cost of producing revenue through the sale of goods or services. They can come in many forms such as salaries or wages, and depreciation of assets. An expense can be almost anything that is incurred when doing business.
Accounting Period The Accounting period is the amount of time in which income statements and other financial statements are utilized to track and report operating results. They usually run for twelve months between January to December, but can begin and end anytime depending on the businesses needs or wants.
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Module Two: Review You should now be familiar with a few general accounting terms most often used for businesses. Remember:
A balance sheet is a financial statement that shows the assets, liabilities, and owner’s equity at a specific point in time.
Whether tangible or intangible, ownership of any form of value such as cash or stock is considered an asset.
Liabilities are probable future sacrifices of income or assets, arising from present obligation to a particular entity.
Equity can be ownership in assets after all debts owed for that asset have been paid off.
An income statement includes a summary of how a business typically incurs its revenues and expenses over a fiscal quarter or year.
Revenue can be a transaction and the resulting income for which monies are received.
Cost of Goods Sold is the cost of purchases made during an inventory period minus the ending inventory for that period.
Expenses are the cost of producing revenue through the sale of goods or services.
An accounting period is a period of time in which income statements and other financial statements are utilized to track and report operating results.
Estimated Time
25 minutes
Topic Objective
To help recognize and familiarize yourself with accounting terms.
Topic Summary
Now that you have been introduced to a few of the basic accounting terms, you should be able to develop recognition of all of the terms.
Materials Required
Worksheet : “Basic Terminology” word search, writing utensil
Planning Checklist
Allow enough time to find the majority, if not all of the words in the word search.
Recommended Activity
Complete the word search independently. Discuss the answers as a group.
Stories to Share
None
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Delivery Tips
For an interactive twist on this activity, allow participants to get into teams of two or four and race to find the words, in a friendly competition. What are the three main components included in a balance sheet?
Review Questions COGS is the abbreviation for what term?
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Knowledge is like money: the more he gets the more he craves. Josh Billings
Module Three: Basic Terminology (II) In this unit, we will finish up with the basic accounting terms that are bound to impress at the next corporate fundraiser for the IRS. I know what you’re thinking. There is no such thing as a corporate fundraiser for the IRS because the only funds the IRS will be raising are those out of our wallets. Below are the next few terms you will need to know!
Accounts Receivable This type of record is used to keep track of money that is owed to a business. Such money can come from extending credit to a customer who purchases the businesses products or services. The best way to keep track of these figures is to set up a separate accounts receivable record for each customer.
Accounts Payable This type of record is used to keep track of debts owed by a business to creditors for purchased goods or services. Though the business will likely be billed regularly by its creditors for the balance on the account, having its own records will allow the business to be aware of their financial standing with the creditors at any given time.
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Depreciation Involves both the decline in value of assets, usually due to unfavorable market conditions as well as the allocation of the costs of tangible assets over their useful lifetime to the periods in which the assets are actually used. The decline in value will have an effect on the value of business and entities while the allocation of cost effects net income.
General Ledger In double-entry accounting, these are forms used for the accounts on separate sheets, in a book or binder and are called the general ledger. This is considered to be a permanent, classified record for each business account.
Interest Interest is a sort of compensation to a lender for taking a risk of principal loss when money or another asset is loaned. When money is borrowed the, borrower usually pays a percentage of the total amount owed also known as the principal, as a fee, along with a certain amount of the original balance for each billing period. It is a sum amount charged for borrowing.
Inventory Inventory can be described as either a list of goods and materials or the goods and materials themselves. It is considered an asset and usually refers to materials held in stock by a business. Inventory is one of the most important assets that a business possesses because they are ready or will be ready to be sold thus; inventory is often a primary source for revenue.
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Journals A journal is used to record the financial transactions made by a business. Whether the transactions are credits or debits, they should be input into a journal at the time and date which they occur. These recordings can then be used for future reference and reconciling and can be transferred to other official records such as the general ledger. All journal entries should include the transaction date, type, and amount.
Payroll Payroll can refer to either the total sum in compensation that a business owes to its employees for a set period of time, or the actual list of employees the business must pay along with the amount owed. It is usually a major expense for businesses but will likely differ from time to time depending on the business’ need of its employees at the time, amongst other things.
Trial Balance A worksheet usually prepared at the end of each recording period. The balances of all ledgers are recorded into two columns labeled “debits” and “credits”. This worksheet helps to ensure that all numerical data entered into the business’ bookkeeping system is correct. If the total debits are in fact equal to the total credits, the trial balance is balanced. This worksheet method is also referred to as a T-Account due to the shape the data takes on with the two column format.
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Module Three: Review You should now be familiar with a few accounting documents most often used for businesses as well as terms which can define the health of a business. Remember:
Accounts receivable are those records which keep track of money owed to a business or money received.
Accounts payable involves records which keep track of money owed by the business or money paid.
Depreciation most often refers to the decline in value of assets but may also refer to the allocation of the costs of tangible assets over their useful lifetime.
The general ledger is used to keep permanent, classified record of business accounts.
Interest is a form of compensation owed to a lender from the borrower for allowing them to borrow.
Inventory can be either a list of goods and materials of a business or the goods and materials themselves.
A journal is used to record the financial transactions made by a business, whether they are credits or debits.
Payroll can be either the total sum in pay a business owes to its employees of the actual list of employees the business shall pay.
And finally, a trial balance is used to record the balance of all ledgers, usually in the format of two columns labeled “debits” and “credits”, known as the T-Account format.
Estimated Time
25 minutes
Topic Objective
To learn basic accounting terminology.
Topic Summary
Now that you have been introduced to a few more of the basic accounting terms, you should be able to match them to their meanings.
Materials Required
Worksheet: “Basic Terminology” Crossword Puzzle, Writing utensil
Planning Checklist
Allow enough time to find the majority, if not all of the words in the crossword puzzle.
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Recommended Activity
Complete the crossword puzzle independently. Discuss as a group.
Stories to Share
Accounting can be a dry subject, but lighten it up with humor found by clicking the following link: http://www.groco.com/readingroom/humor.aspx
Delivery Tips
None What is the basic use of journals?
Review Questions
Does depreciation involve the gaining or losing of value? Between accounts receivable and accounts payable, which one is referenced when making payments?
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You can’t do today’s job with yesterdays methods and be in business tomorrow. Anonymous Module Four: Accounting Methods Since the preceding units of this course were a piece of cake, now let’s talk about accounting methods, starting with the topics of cash and accrual. When you were a child, if your parents allowed you to go door to door selling items for your school’s fundraiser, you have used cash and accrual methods. It’s a simple concept that allows you to record the sale or purchase of an item even if you have not yet received payment.
Cash Method This means that you will record the money once you receive it. The receipts for such transactions are recorded during the periods they are received. An example of this method is when you are making a cash deposit in the bank and they record it into your account as receiving cash. If you present the teller with a check, then she would not be able to document it as cash. If the teller does not record the cash as she receives it, she would not be able to properly account for the cash later.
Estimated Time
15 minutes
Topic Objective
Learn the information provided.
Topic Summary
“You will record the money once you receive it” is the main idea of the cash method. Test your knowledge and understanding of this meaning.
Materials Required
Bean bags, writing utensils
Planning Checklist
Bring two bean bags (one for each group).
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Recommended Activity
Get into groups and toss the bean bag as each participant cites situations where the cash method is commonly used.
Stories to Share
None.
Delivery Tips
None. What does cash method mean?
Review Questions When are receipts recorded?
Accrual Method Accrual is the method of accounting in which all income and expenses are recognized on the income statement at the time when they are earned and incurred, regardless of when the cash for that transaction is received or paid. An example of this method would be, when you work, your hours are documented, and although you are earning a salary, you won’t receive the money you have accumulated until you get a pay check, and it is cashed. The accounting department still has to recognize that those funds are going to be paid in the future.
Estimated Time
15 minutes
Topic Objective
Learn the information provided.
Topic Summary
“You will record the money when earned but not necessarily paid” is the main idea of the accrual method. Test your knowledge and understanding of this meaning.
Materials Required
Bean bags, writing utensils
Planning Checklist
None.
Recommended Activity
Get into groups and toss the bean bag as each participant cites situations where the accrual method is commonly used.
Stories to Share
To get a better look at how to convert cash to accrual, view the following video: http://www.ehow.com/video_4987107_converting-cash-accrual.html
Delivery Tips
None.
Review Questions
What does accrual method mean?
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What statement are income and expenses recognized on?
Differences between Cash and Accrual The differences between the two are that the cash method is recorded when you receive the actual cash whereas with the accrual method, you will record it even if you have not received it or paid for it. For example, you are selling candy bars for your child’s school, when you receive the cash; you mark it down in the paid section. This is considered the cash method. If you were using the accrual method, you would want to record the transaction with anticipation of receiving the funds at a later date. This method will help you keep track of anticipated funds so that you can better manage your business. With the cash method, you receive the revenue at the time of the transaction like when you go into a store and purchase something vs. putting something on a “pay later” plan.
Estimated Time
15 minutes
Topic Objective
Learn the information provided.
Topic Summary
Use the exercise to determine what accounting method should be used for particular financial transactions.
Materials Required
Flip chart and marker
Planning Checklist
Create a list of 10 potential financial transactions (e.g. selling candy bars for a school fundraiser).
Recommended Activity
Divide participants into two groups. Designate one recorder for each group and allow the recorder of each group to write the BEST accounting method for each transaction. Once each team has written their responses for all of the transactions, go over their answers as a large group.
Stories to Share
None.
Delivery Tips
None. What is the difference between the cash method and accrual method?
Review Questions
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What anticipation would you have when recording using the accrual method?
Module Four: Review Questions 1. What does cash method mean? a) Record the money as you receive it a) Record the money as you earn it but not receive it b) Only accept cash when conducting transactions c) Do not accept cash when conducting transactions There are two commonly used accounting methods. The accrual method is used to record money as it is earned but not necessarily paid. The cash method is used to record payment as it is received. 2. When are receipts recorded with the cash method? b) When the transaction is completed but the payment is not made c) When the payment is received d) The fiscal year following when the transaction is completed e) The quarter following when the transaction is completed The receipts are recorded at different times with cash method of accounting as opposed to the accrual method. With the cash method, it is done as soon as the payment has been made. The accrual method records the receipts when the transaction is complete, but the payment does not have to be made. 3. What does accrual method mean? a) Record the money as you receive it b) Record the money as you earn it but not receive it c) Only accept cash when conducting transactions d) Do not accept cash when conducting transactions There are two commonly used accounting methods. The accrual method is used to record money as it is earned but not necessarily paid. The cash method is used to record payment as it is received.
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4. What statement are income and expenses recognized on? a) Balance sheet b) Statement of cash flows c) Income statement d) Declaration statement There are four main types of financial statements. The income statement is used to document income and expenses. 5. What is the main difference between the cash method and accrual method? a) There is no difference b) The accrual method is only used for large businesses while the cash method is only used for small businesses c) The accrual method is only used for small businesses while the cash method is only used for large businesses d) The time at which the receipts are recorded The recording time of the transaction is the major difference between the two methods. 6. What anticipation would you have when recording using the accrual method? a) Receiving the funds at a later date b) Immediately receiving the funds c) Not ever collecting the funds; receiving a tax write-off d) Eventually having to convert the recording to the cash method The time at which funds are received is the major difference between this method and the cash method.
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