Business Administration 2257 Chapter Notes - Chapter 4: Interest Rate, Retained Earnings, Deferral
3 Oct 2018
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Accrual basis of accounting: revenues and expenses are recognized in the period in which they relate (rather then when the cash is actually received) Cash basis of accounting: revenue is recorded only when cash is received, and an expense is recorded only when cash is paid: can be misleading because it leaves a time gap between matching efforts. Interim periods: time periods shorter than a fiscal year. Revenue recognition occurs when: the sales or performance effort is substantially complete, the revenue amount is determinable (measurable, the collection of revenue is reasonably assured. *revenue recognition is not tied to the payment of cash. Unadjusted trial balance: trial balance was prepared before adjusting entries were made. Accrued expenses: expenses paid in cash and recorded as, revenues earned but not yet received assets before they are used in cash or recorded. Accrued revenue: cash received and recorded as, expenses incurred but not yet paid in liabilities before revenue is earned cash or recorded.
