exam 2 acct - Accrual-basis accounting records revenues...

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Accrual-basis accounting records revenues when earned (the revenue recognition principle) and expenses with related revenues (the matching principle) Point of Difference Accrual Basis Cash Basis Accrual- revenue recognition -when revenue is earned, expense recognition – with revenues (matching principle (PART OF GAAP) Cash – revenue recognition – when cash is received, expense recognition –when cash is paid (NOT PART OF GAAP) Paying bank notes/ common stock/ borrowing from the bank/ paying on acct/ paying dividends = not accrual or cash basis Prepayments (deferrals): Prepaid expenses – we paid cash (or had an obligation to pay cash) for the purchase of an asset before we incurred the expense. Unearned revenues – we received cash and recorded a liability before we earned the revenue. Accruals: Accrued expenses – we paid cash after we incurred the expense and recorded a liability. Accrued revenues – we received cash
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exam 2 acct - Accrual-basis accounting records revenues...

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