Under accrual-basis accounting
net income is calculated by matching cash outflows against cash inflows .
the ledger accounts must be adjusted to reflect a cash basis of accounting before financial statements are prepared under generally accepted accounting principles .
cash must be received before revenue is recognized .
events that change a company ’ s financial statements are recognized in the period they occur rather than in the period in which cash is paid or received .
Multiple Choice Question 165 Expenses paid and recorded as assets before they are used are called accrued expenses . interim expenses . prepaid expenses . unearned expenses . Multiple Choice Question 152 The adjusted trial balance is prepared after financial statements are prepared . after adjusting entries have been journalized and posted . before the trial balance . to prove the equality of total assets and total liabilities