tutorial for sunshine - 2 The two generally accepted...

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2. The two generally accepted accounting principles that pertain to adjusting the accounts are: The revenue recognition principle, which states that revenue should be recognized in the time period in which it is earned. The matching principle which states that efforts (expenses) be matched with accomplishments (revenues) that they helped generate. 3. The law firm should recognize the revenue in April. The revenue recognition principle states that revenue should be recognized in the accounting period in which it is earned. 4. Because it provides the comparability of financial data from period to period. It also useful when comparing the financial results of two companies in same industry. EXERCISE 3-2 (a) Cash Accrual Revenue $22,000 $26,000 Expenses Operating 13,500 15,000 Insurance 2,500 0000000 Net income $ 6,000 $ 11,000 (b) The accrual basis provides the most useful information for decision making as it reflects transactions in the period in which they occur and properly matches revenue and expenses.
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EXERCISE 3-7 1. Mar. 31 Amortization Expense ($400 × 3) ..................... 1,200 Accumulated Amortization— Equipment ............................................... 1,200 2. 31 Unearned Rent Revenue ................................... 3,100 Rent Revenue ($9,300 × 1/3) ..................... 3,100 3. 31 Interest Expense
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