Textbook Notes (381,055)
CA (168,340)
UTSC (19,304)
MGA (381)
MGAB01H3 (127)
Liang Chen (50)
Chapter

Timing Issues&accural

2 Pages
121 Views

Department
Financial Accounting
Course Code
MGAB01H3
Professor
Liang Chen

This preview shows half of the first page. Sign up to view the full 2 pages of the document.
Timing Issues
Selecting an accounting Time Period
¾ Accountants make the assumption that the economic life of a business can be divided
into artificial time periods. This assumption is referred to as the time period
assumption
Fiscal and Calendar Years
¾ Accounting time periods are generally one month, one quarter, or one year
¾ Time periods of less than one year are called interim periods
¾ An accounting time period that is one year in length is referred to as a fiscal year
¾ The accounting period used by many businesses coincides with the calendar year
Recognizing Revenues and Expenses
¾ Revenue Recognition Principle: revenue must be recognized in the accounting period
in which it is earned
¾ The Matching Principle: expenses should be recognized in the same accounting
period as the revenue they help to earn
Accrual Vs Cash Basis of Accounting
Accrual basis of accounting
¾ If you follow the revenue recognition and matching principles, you are using the
accrual basis of accounting
¾ Transactions that FKDQJHDFRPSDQ\¶VILQDQFLDOVWDWHPHQWVDUHUHFRUGHGLQWKHSHULRGV
in which the events occur
Cash basis of accounting
¾ Revenue is recorded when cash is received and expenses are recorded when cash is
paid
¾ The cash basis often leads to misleading financial statements
¾ It is not in accordance with generally accepted accounting principles (revenue
recognition & matching principle)
¾ This form of accounting is used by small businesses with little receivables and
payables
Accrual
2008
2009
Cash basis
2008
2009
Revenue
26000
0
22000
4000
Expenses
15000
0
13500
1500
Prepaid
2500
0
0
2500
www.notesolution.com

Loved by over 2.2 million students

Over 90% improved by at least one letter grade.

Leah — University of Toronto

OneClass has been such a huge help in my studies at UofT especially since I am a transfer student. OneClass is the study buddy I never had before and definitely gives me the extra push to get from a B to an A!

Leah — University of Toronto
Saarim — University of Michigan

Balancing social life With academics can be difficult, that is why I'm so glad that OneClass is out there where I can find the top notes for all of my classes. Now I can be the all-star student I want to be.

Saarim — University of Michigan
Jenna — University of Wisconsin

As a college student living on a college budget, I love how easy it is to earn gift cards just by submitting my notes.

Jenna — University of Wisconsin
Anne — University of California

OneClass has allowed me to catch up with my most difficult course! #lifesaver

Anne — University of California
Description
Timing Issues Selecting an accounting Time Period Accountants make the assumption that the economic life of a business can be divided into artificial time periods. This assumption is referred to as the time period assumption Fiscal and Calendar Years Accounting time periods are generally one month, one quarter, or one year Time periods of less than one year are called interim periods An accounting time period that is one year in length is referred to as a fiscal year The accounting period used by many businesses coincides with the calendar year Recognizing Revenues and Expenses Revenue Recognition Principle: revenue must be recognized in the accounting period in which it is earned The Matching Principle: expenses should be recognized in the same accounting period as the revenue they help to earn Accrual Vs Cash Basis of Accounting Accrual basis of accounting If you follow the revenue recognition
More Less
Unlock Document


Only half of the first page are available for preview. Some parts have been intentionally blurred.

Unlock Document
You're Reading a Preview

Unlock to view full version

Unlock Document

Log In


OR

Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


OR

By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.


Submit