COMMERCE 1AA3 Chapter Notes - Chapter 3: Accrual, Revenue Recognition, Financial Statement

• School: McMaster University
• Department: Commerce
• Course: COMMERCE 1AA3
• Professor: Aadil Merali Juma

Document Summary

Chapter 3: accrual accounting and the financial statements. Accounting provides the information needed for financial decision making. Accounting information can either be prepared using the cash basis or the accrual basis of accounting. When using cash-basis accounting, we record only business transactions involving the receipt or payment of cash, all other business transactions are ignored. Similarly, a business would not record the purchase of ,000 of inventory on account until it actually pays cash for the goods at a future date. The receipt or payment of cash is irrelevant to deciding whether a business transaction should be recorded. What matters is whether the business has acquired an asset, earned revenue, taken on a liability, or incurred an expense. The gross inflow of economic benefits during the period arising in the course of the ordinary activities of an entity when those inflows result in increases in equity, other than increases relating the contributions from equity participants.