Section 2 - ACC 200 Spring 2011 Section 2 The Cash Basis of...

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Click to edit Master subtitle style ACC 200 – Spring 2011 Section 2: The Cash Basis of Accounting Lecture Class #3 Christopher T. McKittrick CPA, MBA, CFE College of Management
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Section 2 Objectives – THE CASH BASIS OF ACCOUNTING ¢ Describe the cash and accrual bases of accounting ¢ Describe the revenue recognition and matching principles ¢ Use the cash basis of accounting to analyze, record and summarize transactions for a business ¢ Use the cash basis of accounting to prepare financial statements (income statement, balance sheet and retained earnings statement) ¢ Describe the advantages and disadvantages of the cash basis of accounting
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33 Accounting for Business Transactions ¢ A transaction is defined as … … a simultaneous exchange between one accounting entity and another Customers, suppliers, employees, owners (shareholders), creditors etc.
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KEY ACCOUNTING CONCEPTS ¢ Key concepts for CASH vs. ACCRUAL l Time Period Assumption When did the transaction occur? l Revenue Recognition Principle When can I recognize that the revenue transaction occurred? l Matching Principle When do I record the expense transaction?
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55 Revenue Recognition ¢ Cash Basis – when cash is received from a customer ¢ Accrual Basis – when the revenue is earned l Which may be before or after the cash is received!
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Expense Recognition ¢ Cash Basis
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Section 2 - ACC 200 Spring 2011 Section 2 The Cash Basis of...

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