COMM-1107EL Chapter 3: Accrual Accounting and the Financial Statements
14 Mar 2017
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Chapter 3 a(cid:272)(cid:272)rual a(cid:272)(cid:272)ou(cid:374)ti(cid:374)g a(cid:374)d the fi(cid:374)a(cid:374)(cid:272)ial. When using cash-basis accounting, we record only business transactions involving the receipt or payment of cash, all other business transactions are ignored. Not an accepted method by the ifrs or aspe. When using accrual accounting, the receipt or payment of cash is irrelevant to deciding whether a business transaction should be recorded. What matters is whether a business has acquired an asset, earned revenue, taken on a liability, or incurred an expense. If it has, then it is recorded in the accounting records. Recording the initial transaction this way results in a deferral of the expense to the future period in which the related benefit is realized. Businesses sometimes receive cash from customers before providing them with the goods or services they have paid for because the goods/services have not been delivered, the revenue recognition principle calls this unearned revenue.
