0 calificaciones0% encontró este documento útil (0 votos)
32 vistas1 página
This document discusses accrual versus cash basis accounting and adjusting entries. Accrual basis accounting records transactions when they occur, recognizing revenues when earned and expenses when incurred. Cash basis accounting recognizes revenues when cash is received and expenses when cash is paid. Adjusting entries are needed under accrual basis accounting to ensure revenues are recorded in the period earned and expenses matched to revenues. There are two types of adjusting entries: deferrals for prepaid expenses and unearned revenues, and accruals for accrued revenues not yet received and accrued expenses incurred but not yet paid.
This document discusses accrual versus cash basis accounting and adjusting entries. Accrual basis accounting records transactions when they occur, recognizing revenues when earned and expenses when incurred. Cash basis accounting recognizes revenues when cash is received and expenses when cash is paid. Adjusting entries are needed under accrual basis accounting to ensure revenues are recorded in the period earned and expenses matched to revenues. There are two types of adjusting entries: deferrals for prepaid expenses and unearned revenues, and accruals for accrued revenues not yet received and accrued expenses incurred but not yet paid.
This document discusses accrual versus cash basis accounting and adjusting entries. Accrual basis accounting records transactions when they occur, recognizing revenues when earned and expenses when incurred. Cash basis accounting recognizes revenues when cash is received and expenses when cash is paid. Adjusting entries are needed under accrual basis accounting to ensure revenues are recorded in the period earned and expenses matched to revenues. There are two types of adjusting entries: deferrals for prepaid expenses and unearned revenues, and accruals for accrued revenues not yet received and accrued expenses incurred but not yet paid.
Acrual Basis Accounting 1. Transactions recorded in the periods in which the evens occur. 2. Revenues are recognized when earned, rather than when cash is received. 3. Expenses are recognized when incurred, rather than when paid. Cash Basis Accounting 1. Revenues are recognized when cash is received. 2. Expenses are recognized when cash is paid. 3. Cash basis accounting is not in accordance with generally accepted accounting principles (GAAP). The Basics of Adjusting Entries Adjusting entries make it possible to report correct on the balance sheet and on the income statement. A company make adjusting entries every time it prepares financial statement. ~ Revenues, recorded in the period in which they are earned. ~ Expenses, recognized in the period in which they are incurred. ~ Adjusting entries, needed to ensure that the revenue recognition and matching principles are followed. Types of Adjusting Entries 1. Defferal a. Prepaid Expenses Expenses paid in cash and recorded as assets before they are used or consumed. b. Unearned Revenues Revenues received in cash and recorded as liabilities before they are earned. 2. Accruals a. Accrued Revenues Revenues earned but not yet received in cash or recorded. b. Accruel Expenses Expenses incurred but not yet paid in cash or recorded.