1. When dealing with adjusting entries, what is the first question that must be answered?

2. What is the difference between an accrual and a deferral?

3. If legal services are paid in advance at a law firm, what type of account would be increased?

4. Why should prepaid fees be considered a liability?

5. What type of account should show services provided for which payment has not yet been received?

6. At the end of the accounting period, if wages have been earned but not yet paid, which two accounts are impacted and with what type of entries?

7. If you were the person in charge of doing the accounts for a law firm, how would you explain to the partners why the firm should use accrual rather than cash-basis accounting in preparing its financial statements?