Completing The Accounting CycleAnswer questions related to the accounting cycle.IntroductionA company may be profitable but cash poor, or generating millions of dollars in revenue but still not profitable. How the business transactions are reported in books is very important for regulators as well as investors. Accurate reporting of business transactions is essential for transparency.This course has introduced the accounting process of analyzing, classifying, and summarizing business transactions into accounts. Now, you begin to examine things in more detail, including:The difference between the cash basis and accrual basis of accounting.The classes and types of adjusting entries (prepared at the end of an accounting time frame).Use of a worksheet to summarize the work completed during the accounting period.The preparation of an organization’s closing entries.How to report financial data using a classified balance sheet.OverviewThis assessment focuses on the need for adjusting entries, including:The difference between the cash and accrual bases of accounting.The concept of adjusting entries and how they are prepared.How to classify adjusting entries.The concept of asset depreciation and its effect on book values.PreparationComplete the Assessment 3 Template [DOCX].Review all suggested readings.Note: Accuracy in accounting is paramount so take your time and double-check your work for errors or omissions.Answer questions correctly. When you are satisfied with your responses, save and submit your template in the courseroom.Step 1: Compare and contrast how revenues and expenses are reported under the cash basis of accounting and the accrual basis of accounting.Step 2: Explain why adjusting entries are necessary at the end of an accounting period.Step 3: Identify examples of an adjusting journal entry for various types of transactions.Step 4: Explain accumulated depreciation.Step 5: Identify which account balances are extended to the Income Statement columns, the Statement of Retained Earnings columns, and the Balance Sheet columns.Step 6: Determine the current ratio between assets and liabilities for a given year.Step 7: List the accounting cycle steps in proper order.Competencies MeasuredBy successfully completing this assessment, you will demonstrate your proficiency in the following course competencies and assessment criteria:Competency 1: Define accounting terminology and its application to accounting principles.Compare and contrast how revenues and expenses are reported under the cash basis of accounting and the accrual basis of accounting.Explain accumulated depreciation.List the accounting cycle steps in proper order.Competency 2: Apply accounting cycle strategies to manage business financial events.Explain why adjusting entries are necessary at the end of an accounting period.Identify examples of an adjusting journal entry for various types of transactions.Identify which account balances are extended to the Income Statement columns, the Statement of Retained Earnings columns, and the Balance Sheet columns.Determine the current ratio between assets and liabilities for a given year.Competency 4: Convey purpose, in an appropriate tone and style, incorporating supporting evidence and adhering to organizational, professional, and scholarly writing standards.Convey clear meaning through appropriate word choice and usage.