Running head: Learning Team Reflection

University of Phoenix

ACC/290 Principles of Accounting I

04 November 2012

Learning Team Reflection – Week 3 This week, we have learned that accounting involves more than recording transactions and balancing accounts. Along with journalizing transactions and adjusting entries, the accounting cycle also involves closing entries and preparing a post-closing trial balance. We believe that the most important of the skills learned when we are in an accounting position is to understand the basic accounting equation, assets + liabilities + stockholder’s equity. Most accounting concepts all go back to this equation as the basis for balancing accounts when transactions are journalized in them. There are two types of accounting methods used to maintain financial records and prepare reports: accrual and cash basis accounting. Accrual basis accounting is the method that is accepted under the Generally Accepted Accounting Principles (GAAP). This principle holds that accounting transactions are recognized and recorded when the expense or revenue actually occurred, not when cash changes hands (James, 2012). The benefit of accrual basis accounting is that expenses and revenues can be matched as they happen, which is much more effective for monitoring cash flow (Epstein, n.d.). Accrual accounting has a more complex recording process than cash basis accounting and can be a disadvantage when it comes time to pay taxes. Because this accounting method requires that expenses and revenue are recorded right away, the taxes must be paid on the recorded revenue; even if it has not been yet been paid (Reference For Business, 2012). Adjusting entries are recorded at the end of every accounting period after the trial balance. There are five types of