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ACCT 2013 Lecture Notes - Lecture 5: Deferred Income, Accrual, Matching Principle

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tealwombat933
31 Jan 2019
School
University of Arkansas
Department
Accounting
Course
ACCT 2013
Professor
Jason Fowler

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Document Summary

Revenue recognition principle: revenues are recorded in the period in which the goods or services are provided to the customers not when we receive the cash. Expense recognition principle (matching principle): expenses are reported in the same period as the revenues to help generate. When we report our revenues, we should also record all the expenses incurred. Ex: if you have expenses occurring from march-may and only have revenue in april, you record the revenue and the expenses in april. Accrual basis: revenue is recorded only at the time a service is provided; expenses are recorded for the amount of the cost used to help produce the revenue; basically, when good or service happens. Cash basis: the revenue equals the amount of cash received; the expense equals the amount of cash paid; looking at cash. When goods and services are provided to customers. In the period costs are used to help produce revenues.

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Related Questions

Which of the following statements about accrual-basis accounting is not true?

a. It uses the revenue recognition principle.

b. It uses the expense recognition principle

c. It is required for external accounting reports.

d. It requires the timing of cash receipts to be in the same period as revenues are recognized.

Which of the following statements is true in regard to accrual accounting?

a. Revenue is recorded only when cash is received

b. Expenses are recorded when they are incurred.

c. Revenue is recorded in the period when it is earned.

d. Both b & c.

 

1. Undercash-basis accounting, when is revenue recorded? When is itrecorded under accrual-basis accounting?

2. Under accrualaccounting, when is revenue considered earned?

3. If amembership represents an advance payment for services provided,when is it recognized as revenue under the accrual basis, and whatis it called?

4. Why isinsurance expense spread over multiple periods even though thepolicy coverage is paid in advance?

5. At the end ofthe month for Silver’s Gym, what entries need to be made under thecash basis of accounting for wages that have not yet been paid?What entries need to be made under the accrual method?

6. Why is itimportant to match expenses and revenues to reflect the performanceof a business over a particular time period?

7. When mightthe use of cash basis accounting overstate the actual profitsearned by Silver’s gym? When might it understate the actual profitsearned?

8. Which basisof accounting is in accordance with GAAP for large companies?