ACCT 284 - Ch3 Glossary

ACCT 284 - Ch3 Glossary - Operating Cycle(Cash-to-Cash...

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Chapter 3 Glossary Accrual Basis Accounting Records revenues when earned and expenses when incurred, regardless of the timing of cash receipts or payments. Cash Basis Accounting Records revenues when cash is received and expenses when cash is paid. Expenses Decreases in assets or increases in liabilities from ongoing operations incurred to generate revenues during the period. Gains Increases in assets or decreases in liabilities from peripheral transactions. Losses Decreases in assets or increases in liabilities from peripheral transactions. Matching Principle Requires that expenses be recorded when incurred in earning revenue.
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Unformatted text preview: Operating Cycle (Cash-to-Cash Cycle) The time it takes for a company to pay cash to suppliers, sell those goods and services to customers, and collect cash from customers. Revenue Principle Revenues are recognized when goods or services are delivered, there is evidence of an arrangement for customer payment, the price is fixed or determinable, and collection is reasonably assured. Revenues Increases in assets or settlements of liabilities from ongoing operations. Time Period Assumption The long life of a company can be reported in shorter time periods....
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