30 - EXPENSES REVENUES • May be paid in cash Paying...

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Time-Period Concept Businesses do not stop operations to measure financial transactions Accountants prepare financial statements at regular intervals to measure performance Companies select a twelve-month period for reporting purposes: Calendar year Fiscal year The Revenue Principle Revenue is recorded when earned When product or service is delivered to customer Cash may come before, at the same time, or after delivery Revenue is recorded at the cash value of goods or services provided The Matching Principle Expenses are incurred to help produce revenue Expenses should be recorded in the time period in which they are incurred Expenses should be matched to the revenues they help produce
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Unformatted text preview: EXPENSES - REVENUES • May be paid in cash Paying monthly rent • May arise from using up an asset Using supplies previously purchased • May arise from creating a liability Receive a bill from a supplier The Adjustment Process • At the end of the period, a business prepares financial statements • Ensures that: All revenue that has been earned has been recorded All expenses that have been incurred are matched to revenues Asset and liability accounts are up-to-date Categories of Adjusting Entries • Deferrals • Depreciation • Accruals...
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