You are on page 1of 3

Writers Surname, 1

Instructors Name:
Accounting Terms and Applications (W2)
Accrual accounting refers to that method of accounting in which expenses are recorded when
they are incurred instead of when they are paid. Likewise, incomes are recognized when they are
earned rather than when their payments are received. On the other hand, cash accounting refers
to that accounting in which expenses are recognized when they are paid for. Similarly, income is
recognized in the even when their payment is received.
Trial balance is a statement having two columns i.e. Debit and Credit columns. In debit columns,
those account balances are shown which have the nature of being either assets or expenses
whereas those account balances that have the characteristics of being either income, liabilities or
equity nature. Trial balance is used by the entities to prepare other financial statements i.e.
income statement and balance sheet.
A worksheet used in accounting have various important benefits. The most important benefit is
that it is prepared in multiple columnar form in which trial balance, adjustments to trial balance,
adjusted trial balance, income statement and balance sheet, are prepared. The most important
benefit is that whenever there is any adjustment in the trial balance it automatically leads to a
change in the relevant financial statements i.e. income statement and balance sheet.

Writers Surname, 2

The process of closing of books refers to the concept in which the income statement account
balance i.e. expenses and income are closed with the net figure of profit or loss and then that
figure becomes part of equity of the entity. It is related to a business in such a way that by
closing down the income and expenses account balances, the business would obtain the fair idea
of how its business operations performed during the period whether they were profitable or lossmaking in a year.

Writers Surname, 3

Work Cited
Delaney, Patrick R et al. Wiley CPA Examination Review. New York: Wiley, 2000. Print.
Diamond, Michael A, Earl K Stice, and James D Stice. Financial Accounting. [Cincinnati, OH]:
Southwestern College Pub., 2000. Print.