29 - When sale is made When bill is received Complies with...

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Normal Balance What increases the account (debit or credit) is the normal balance Assets are increased by debits, so assets have a normal debit balance If the balance is not “normal”, it indicates a negative amount If cash has a credit balance, it means the company has overdrawn its bank account Normal Balances DEBITS Assets Dividends Expenses CREDITS Liabilities Retained Earnings Common Stock Revenues T-Accounts A quick informal analysis Helps users of financial information make decisions Accrual vs. Cash-Basis Accounting ACCRUAL Records business transactions when they occur
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Unformatted text preview: When sale is made When bill is received Complies with GAAP Presents accurate financial picture CASH Records transactions only when cash is received or paid When customer pays for product or service When bills are paid Only used by very small businesses Omits important info Accrual Accounting and Cash Flows Accrual accounting records both cash and non-cash transactions Cash Collecting from customers Paying for expenses Borrowing money Issuing Stock Non-cash Sales on account Purchases on account Using prepaid expenses, such as supplies...
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This note was uploaded on 06/14/2011 for the course ACCOUNTING 23020 taught by Professor Na during the Spring '11 term at Kent State.

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29 - When sale is made When bill is received Complies with...

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