1. Discuss the concept of accrual accounting and its importance in financial reporting. Calculate the accruals for a company with the following information:

• Revenue of $100,000 for the year
• Sales tax payable of $10,000 at the end of the year
• Accounts receivable of $20,000 at the end of the year

2. Explain the concept of conservatism in accounting and how it affects financial reporting. Calculate the effect of conservatism on a company's financial statements by comparing the balance sheet under accrual and conservative accounting for a company with the following information:

• Assets of $500,000 at the beginning of the year
• Liabilities of $200,000 at the beginning of the year
• Revenue of $600,000 for the year
• Expenses of $400,000 for the year
• Bad debt expense of $10,000 for the year

Answer rating: 100% (QA)

The detailed answer for the above question is provided below Accrual accounting is a method of accou... View the full answer