Business Administration 2257 Lecture Notes - Lecture 4: Uptodate, Deferral, Retained Earnings
10 Apr 2016
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Revenue recogniion occurs when the sales or performance efort is substanially complete, the amount is determinable (measurable), and collecion is reasonably assured. Expense recogniion ied to changes in assets and liabiliies. Will oten coincide with revenue recogniion but not always. Accrual basis the transacions afecing a company"s inancial statements are recorded in the periods in which the event occurs, rather than when the company actually receives or pays cash. Cash basis revenue is recorded only when cash is received, and an expense is recorded only when cash is paid. Adjusing entries are necessary because the trial balance may not contain up-to-date data. This is true for several reasons: some events are not recorded daily, because it would not be useful or eicient to do so. Examples include rent, insurance, and depreciaion: some items may be unrecorded. An example is a uility service bill that will not be received unil the next accouning period.
