Explain how accrual accounting differs from cash-basis accounting;

| June 4, 2016

Question
Explain how accrual accounting differs from cash-basis accounting; adjust the accounts) An accountant made the
following adjustments at December 31, the end of the accounting period:
a. Prepaid insurance, beginning, $400. Payments for insurance during the period, $1,200. Prepaid insurance, ending, $700.
b. Interest revenue accrued, $1,600.
c. Unearned service revenue, beginning, $1,100. Unearned service revenue, ending, $500.
e. Employees’ salaries owed for three days of a five-day work week; weekly payroll, $18,000.
f. Income before income tax, $21,000. Income tax rate is 25%.Suppose the adjustments were not made. Compute the overall overstatement or understatement of net income as a result of the omission of theseadjustments.

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