Question.Arguments or positions are reasonable and supported with evidence from the research.Ideally, the initialposting fosters further discussion on the topic (in a reply response from your peer), perhaps exploring new lines of argumentor different perspectives.

Judgment Case

Cash versus accrual accounting; adjusting entries:

You are a staff accountant at Reimer & Company, a small public accounting firm. One of the firm's partners, Leona Reimer, has asked you to deal with a disgruntled client, Mr. Robert Ramsey, owner of the city's largest clothing store. Mr. Ramsey is applying to a local bank for a substantial loan to remodel his store. The bank requires accrual based financial statements, but Mr. Ramsey has always kept the company's records on a cash basis. He does not see the purpose of accrual-based statements. His most recent outburst went something like this:

Required:

1. Explain the difference between a cash basis and an accrual basis measure of performance.
2. Why, in most cases, does accrual basis net income provide a better measure of performance than net operating cash flow?
3. Explain the purpose of adjusting entries as they relate to the difference between cash and accrual accounting.

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