CHAPTER 4
ACCRUAL ACCOUNTING CONCEPTS
LEARNING OBJECTIVES
After studying this chapter, you should be able to:
- Explain the revenue recognition principle and the expense recognition principle.
- Differentiate between the cash basis and the accrual basis of accounting.
- Explain why adjusting entries are needed, and identify the major types of adjusting entries.
- Prepare adjusting entries for deferrals.
- Prepare adjusting entries for accruals.
- Describe the nature and purpose of the adjusted trial balance.
- Explain the purpose of closing entries.
- Describe the required steps in the accounting cycle.
- Understand the causes of differences between net income and net cash provided by operating activities.
Feature Story
KEEPING TRACK OF GROUPONS
Who doesn't like buying things at a discount? That's why it's not surprising that three years after it started as a company, Groupon was estimated to be worth $16 billion. This translates into an average increase in value of almost $15 million per day.
Now consider that Groupon had previously been estimated to be worth even more than that. What happened? ...
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