Review Notes Ch 4

Review Notes Ch 4 - CHAPTER 4 Accrual Accounting Concepts...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
CHAPTER 4 Accrual Accounting Concepts Study Objectives 1. Explain the revenue recognition principle and the matching principle. 2. Differentiate between the cash basis and the accrual basis of accounting. 3. Explain why adjusting entries are needed, and identify the major types of adjusting entries. 4. Prepare adjusting entries for deferrals. 5. Prepare adjusting entries for accruals. 6. Describe the nature and purpose of the adjusted trial balance. 7. Explain the purpose of closing entries. 8. Describe the required steps in the accounting cycle. 9. Understand the causes of differences between net income and cash provided by operating activities. 10. Describe the purpose of the basic form of a worksheet. 4-1
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Chapter Outline Study Objective 1 - Explain the Revenue Recognition Principle and the Matching Principle Determining the amount of revenues and expenses to report in a given accounting period can be difficult. Proper reporting requires an understanding of the nature of the company’s business. Two principles are used as guidelines: 1. revenue recognition principle 2. matching principle The revenue recognition principle requires that revenue be recognized in the accounting period in which it is earned. A service company recognizes (records) revenue when the services are performed . The matching principle requires that efforts ( expenses) be matched with accomplishments ( revenues ). The critical issue is determining when the expense makes its contribution to revenue. Study Objective 2 - Differentiate Between the Cash Basis and the Accrual Basis of Accounting With cash basis accounting , revenue is recognized (recorded) when cash is received. Expenses are recognized (recorded) only when cash is paid. Accrual basis accounting requires accountants to adhere to the revenue recognition principle and the matching principle. Cash basis accounting does not satisfy the requirements of Generally Accepted Accounting Principles (GAAP) , whereas accrual basis accounting does. Accrual basis accounting provides an objective measurement of net
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 08/18/2010 for the course ACCOUNTING 6020 taught by Professor Seki during the Spring '10 term at FAU.

Page1 / 6

Review Notes Ch 4 - CHAPTER 4 Accrual Accounting Concepts...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online