ch 4 - 1 Chapter 4 ACCRUAL ACCRUAL ACCOUNTING ACCOUNTING...

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Unformatted text preview: 1 Chapter 4 ACCRUAL ACCRUAL ACCOUNTING ACCOUNTING CONCEPTS CONCEPTS 2 Time Period Assumption... Divides the economic life of a business into artificial time periods WHY? to provide immediate feedback on how the business is doing. 11 1 3 Time Period Assumption... Generally a month, a quarter, or a year. An accounting time period that starts on January 1 and ends December 31 is called a calendar year. An accounting time period that is one year long is called a fiscal year. 4 Revenue Recognition Principle... Dictates that revenue be recognized in the accounting period in which it is earned. Is considered earned when the service has been provided or when the goods are delivered. 5 Matching Principle... Requires that expenses be recorded in the same period in which the revenues they helped produce are recorded. Generally – record them when they happen 6 Review Review a. a. Cost Principle. Cost Principle. b. b. Matching Principle Matching Principle c. c. Periodicity Principle Periodicity Principle d. d. Revenue Recognition Principle Revenue Recognition Principle Which principle dictates that efforts (expenses) Which principle dictates that efforts (expenses) be recorded with accomplishments (revenues)? be recorded with accomplishments (revenues)? 7 When would When would revenue revenue be recorded for the be recorded for the following scenario . . . following scenario . . . Ad agency is hired for a project in May, Ad agency is hired for a project in May, does the work in June and is paid in does the work in June and is paid in July? July? Review Review 8 Review Review When would When would revenue revenue be recorded for the be recorded for the following scenario . . . following scenario . . . Sell plane ticket on September 1 for a Sell plane ticket on September 1 for a flight on October 15? flight on October 15? 9 Review Review When would When would expenses expenses be recorded for the be recorded for the following scenario . . . following scenario . . . The airline pays pilot salaries on October 7 The airline pays pilot salaries on October 7 th th for the week ended September 30th? for the week ended September 30th? 10 Cash Basis Revenue recorded only when cash is received....
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This note was uploaded on 04/02/2008 for the course ACCT 200 taught by Professor Cohen during the Spring '07 term at Arizona.

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ch 4 - 1 Chapter 4 ACCRUAL ACCRUAL ACCOUNTING ACCOUNTING...

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