$1)$ In developing an accounting information system, it is important to establish procedures whereby all transactions that affect the components of the accounting equation are recorded. Why then, is it often necessary to adjust the accounts before financial statements are prepared even in a properly designed accounting system? Identify the major types of adjustments that are frequently made and give a specific example of each.

$2)$ The income statement is an important financial statement used by individuals who are interested in the operations of a business enterprise. Explain how the time period assumption and the revenue recognition and expense recognition principles provide guidance to accountants in preparing an income statement.

$3)$ You are visiting with a friend, Jim Borke, who wants to start a new business. During discussions on forming the business, Jim makes this statement:

Our business will have accounts receivable and accounts payable. It will also acquire a substantial amount of computers and equipment. Will it be acceptable to use the cash basis of accounting or accrual basis accounting? What is the difference between both methods?

$4)$ A new sales representative, Jiggs Lucero, has just received his copy of the month$-$end financial reports. He is puzzled by the term "unearned revenue." He sent the following e$-$mail message to you : "What is this??? Creative Accounting, or what??? Line item $12$ on year$-$to$-$date financials shows over $$25$Gs in Unearned Revenue!!! Come on$,$ guys! Either we earned it$,$ or we didn't... Right??! Is this how you guys lower our commissions?" Explain unearned revenue in detail. What type of account is it $?$ Which financial statement is it recorded in$?$