ADM 1340 Lecture Notes - Lecture 4: General Ledger, Retained Earnings, Trial Balance
ceruleanclam927 and 54 others unlocked
42
ADM 1340 Full Course Notes
Verified Note
42 documents
Document Summary
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.