Question

In your own words:

Explain “Accrual Accounting” and how it provides useful information to users of accounting information

and

.Explain the purpose and timing of the process of bank reconciliation.

Answer 1

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Solution: Theory: 1) Accrued accounting: According to accrued accounting all revenue and expenses which have incurred but not paid, are recorded in the book of financial during the same period. Useful for accounting user: a) Real current picture: Under accrued accounting, real picture of financial transactions (either paid or not) are recorded in the same period which helps user to understand and analyse the financials. b) Helps in investment decision: This will help user to analyse and decide the investment. 2) Purpose and timing of the process of bank reconciliation: Purpose of bank recon is to determine the real cash balance at a specific point of time. Which helps the business to decide whether to pay or arrange cash. The second purpose is to avoid the dishonor of checks due to non sufficient fund in bank account. Bank recon can be prepared on daily, weekly or monthly basis as per business transaction size and requirement. Due to timing difference some checks issued or deposits doesn't affect the accounts and statements during a specific period. But get adjusted in the next periods.