adv acct6 - The'Lectric Law Library's Legal Lexicon On...

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The 'Lectric Law Library's Legal Lexicon On * Accounting Methods * ACCOUNTING EQUATION - A mathematical expression used to describe the relationship between the assets, liabilities and owner's equity of the business model . The basic accounting equation states that assets equal liabilities and owner's equity, but can be modified by operations applied to both sides of the equation, e.g., assets minus liabilities equal owner's equity. ACCRUAL BASIS OF ACCOUNTING - An accounting basis wherein revenue and expenses are recorded in the period in which they are earned or incurred regardless of whether cash is received or disbursed in that period. This is the accounting basis that generally is required to be used in order to conform to generally accepted accounting principles (GAAP) in preparing financial statements for external users. CASH BASIS OF ACCOUNTING - The accounting basis in which revenue and expenses are recorded in the period they are actually received or expended in cash. Use of the cash
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