accrualbasisaccountingACC200

accrualbasisaccountingACC200 - Adjust account balances for...

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Chapter Objectives Describe the accrual basis of accounting Use the accrual basis of accounting to analyze, record, and summarize transactions Prepare financial statements based on the accrual basis of accounting
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CASH VERSUS ACCRUAL ACCOUNTING Cash-basis Accounting Accounting events (transactions) are recorded when cash is exchanged Revenue recorded when cash received Expenses recorded when cash is paid Accrual-basis Accounting Accounting events (transactions) are recorded when they occur not when cash is exchanged Revenues recorded when earned (revenue recognition principle) Expenses recorded when incurred or when related revenue is recognized (matching principle)
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Accrual Basis - Accounting Steps Analyze & record business transactions
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Unformatted text preview: Adjust account balances for non-cash business activity Compute account balances Prepare financial statements ACCOUNTING EQUATION Assets Liabilities Owners Equity = + Contributed Capital Retained Earnings Revenues Expenses Dividends COMMON ACCRUALS Accruals (no previous recording) Cash exchange after business activity Accrual revenues Sales made on account Interest on money lent Accrual expenses Purchases made on credit Wages for employees Interest on money borrowed Income tax expense COMMON DEFERRALS Deferrals (previous recording) Cash exchange before business activity Deferral revenues Subscription revenues (unearned) Deferral expenses Prepaid rent Prepaid insurance Supplies Depreciation...
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accrualbasisaccountingACC200 - Adjust account balances for...

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