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chap 2-JC1 cash vs acc

chap 2-JC1 cash vs acc - Cash accounting only recognizes...

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January 30, 2008 AC 303 Judgment Case 2-1 Accrual accounting measures the performance and position of a company by recognizing economic events regardless of when cash transactions occur. The matching principle is applied, and revenues are matched to their expenses at the time in which the transaction occurred, instead of when payment is made or received. This method gives a more accurate picture of the company’s current financial condition because it combines the current cash inflows/outflows with future expected cash inflows/outflows.
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Unformatted text preview: Cash accounting only recognizes transactions when there is an exchange of cash. The receipts are recorded during the period they are received, and the expenses in the period in which they are actually paid. The accrual accounting method recognizes the sale at the point at which the customer takes ownership of the product. Even though cash isn't yet in the bank, the sale is booked to accounts receivable, increasing the seller's revenue....
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