ADM 1340 Lecture Notes - Lecture 4: General Ledger, Retained Earnings, Trial Balance

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burgundymouse176

26 Apr 2017

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ADM 1340 Full Course Notes

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Chapter 4 accrual accounting concepts : cash basis accounting: (cid:10720) . Events are recognized in the period that cash is paid or received: revenue is recorded only when cash is received, expenses are recorded only when cash is paid. Cash basis accounting can lead to misleading information for decision-making: Revenue and expenses can be manipulated by timing the receipt and payment of cash. Accrual basis of accounting is central to all accounting standards: Expenses are recorded when goods or services are consumed or used. Need some standards that define when we should recognize revenues and expenses: timing issues. Revenue is recognized (recorded) when there is an increase in future economic benefits arising from an increase in an asset or a decrease in a liability, due to ordinary activities. Criteria for recognition: the sales or performance effort is substantially complete, the amount is determinable (measurable, collection is reasonably assured.

Related Questions

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 Silverâs 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 Silverâs gym? When might it understate the actual profitsearned?

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

puceeagle823

Under accrual-basis accounting

	A.	events that change a company's financial statements arerecognized in the period they occur rather than in the period inwhich cash is paid or received.
	B.	net income is calculated by matching cash outflows against cashinflows.
	C.	the ledger accounts must be adjusted to reflect a cash basis ofaccounting before financial statements are prepared under generallyaccepted accounting principles.
	D.	cash must be received before revenue is recognized.

chocolateraven16

Financial Accounting.â¨1. Answer T (true) or F (false) for each of the following statements

1. Revenue is a measure of expected inflow cash from selling goods and providing services.

2. Expenses are a measure of expected outflow of cash consumed, in the process of generating revenues.

3. Dividends represent distributions of earnings and decrease ownersâ equity.

4. Depreciation expense reflects used/consumption of fixed assets.

5. Depreciation associated with land is dependent on the life and eventual use of the land

6. Assets = Liabilities + Contributed Capital + Retained Earnings

7. Under the accrual basis of accounting, revenue is recognized in the period when the cash is received as opposed to when the patient service is made.

Textbook healthcare finance 6th edition L Gapenski & K Reiter (2016)

raspberrybeaver682

ADM 1340 Lecture Notes - Lecture 4: General Ledger, Retained Earnings, Trial Balance

ADM 1340 Full Course Notes

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