Chapter 4 - Chapter 4 p.125 Accrual accounting revenues are...

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Chapter 4 p.125 Accrual accounting - revenues are recognize when earned even when cash is not received. Expenses are recorded as incurred without regard for when they are paid. Periodic Reporting - Time period concept is periodic reporting, monthly, quarterly, annually Fiscal year = reporting period = calendar year Accrual Basis accounting 1. Revenue recognition principle 2. Matching principal v Cash Basis accounting – transactions are recorded an revenues and expenses are recognized only when cash is received or paid. Revenue recognition principle states that revenues are recorded when two main critieria have been met 1. When earning process is complete 2. When cash has been collected The matching principle – all costs and expenses incured in generating revenues must be recognized. p.129 Four Adjusting entries ( 1. always have one debit, one credit 2. one will end up on balance sheet, the other will end up on income 3. no cash involves in adjusting entries) 1. Unrecorded receivable (assets) 2. Unrecorded liabilities
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