ACCT1000 Chapter Notes - Chapter 8: Revenue Recognition, Financial Statement, Accrual
Document Summary
Accounting period concept is an assumption that the economic life of a business can be divided into artificial time periods. Cash-based accounting is an accounting basis in which revenue is recorded only when cash is received, and an expense is recorded only when cash is paid. Accrual-based accounting is accounting basis in which transactions and events are recorded in the periods in which they occur, rather than in the periods in which the entity receives or pays the related cash. One section outlines the definitions of the elements in the financial statements. The conceptual framework defines revenue as increases in economic benefits arising in the course of ordinary activities of an entity. Income is defined in the conceptual framework as encompassing both revenue and gains. The operating cycle is the length of time it takes for a business to acquire goods, sell them to customers and collect the cash from the sale.