There have been several concepts learned and discussed that will be beneficial to persons holding positions in the accounting field. Some skills required to be successful are; differentiating between accrual-basis and cash-basis accounting, detailing what creating adjusting entries entails, and the logistics of preparing an adjusted trial balance.
These two methods are somewhat alike but do have a couple differences. Both methods have been tested and proven to be effective ways for companies to maintain effective financial records. For example, in cash basis, income is recognized as soon as it is received.Unlike accrual basis which recognizes revenue as soon as the service has been invoiced. Accrual basis allows a company to forecast its projected income, because this method looks at services rendered or sold products as revenue once it has been completed not when money is received.
Cash basis doesn’t recognize income until payment is made. This means, depending on the companies reporting cycle, a company could have a negative financial statement due to non-payment or no payment required in that reporting cycle. Adjusted trail balance shows balances that derive from a ledger account that is created after adjusting entries.Adjusted trial balance will show balances of revenue and expenses along with assets, liabilities and stockholder equity. The adjusted trial balance is prepared directly from changes which occur in stockholders equity, income statement, and the balance sheet. While some of these accounting concepts proved to be more difficult to grasp than others, it’s easy to see why they are so crucial to providing the most accurate financial statements possible.
The skills gained have provided insight to what rigorous steps must take place within the accounting world in order to be successful.