Question: 1. Why are adjusting entries necessary under accrual-basis accounting?
2. There are two basic types of adjusting entries-prepayments and accruals. Describe each in terms of the timing of revenue and expense recognition versus the flow of cash.
3. Provide an example of a prepaid expense. The adjusting entry associated with a prepaid expense always includes a debit and credit to which account classifications?
4. Provide an example of an unearned revenue. The adjusting entry associated with an unearned revenue always includes a debit and credit to which account classifications?