3achapter4

3achapter4 - Chapter 4 Accrual Accounting Concepts...

Info iconThis preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon
4-1 Financial Accounting: Tools for Business Decision Making, 4th Ed. Kimmel, Weygandt, Kieso CHAPTER 4 4-2 Chapter 4 Accrual Accounting Concepts KEY THINGS WE’LL DO: Refresh and expand Ch.3 concepts. Differentiate between the cash basis and the accrual basis of accounting. Learn and use adjusting AND closing entries. . 4-3 Periodicity Assumption. .. Divides the economic life of a business into artificial time periods WHY? to provide immediate feedback on how the business is doing. 11 1 4-4 Time Period Assumption. .. Generally a month, a quarter, or a year. An accounting time period that starts on January 1 and ends December 31 is called a calendar year. An accounting time period that is one year long is called a fiscal year.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
4-5 Revenue Recognition Principle. .. Dictates that revenue be recognized in the accounting period in which it is earned. Is considered earned when the service has been provided or when the goods are delivered. 4-6 NOT THAT FUNNY 4-7 Matching Principle. .. (Now they call it the “Expense recognition principle) Requires that expenses be recorded in the same period in which the revenues they helped produce are recorded. 4-8 Review a. Cost Principle. b.Expense Recognition Principle c.Periodicity Principle d.Revenue Recognition Principle Which principle dictates that efforts (expenses) be recorded with accomplishments (revenues)?
Background image of page 2
4-9 Review a. Cost Principle. b.Matching Principle c.Periodicity Principle d.Revenue Recognition Principle Which principle dictates that efforts (expenses) be recorded with accomplishments (revenues)? 4-10 When would revenue be recorded for the following scenario . . . Ad agency is hired for a project in May, does the work in June and is paid in July? June Review 4-11 Review When would expenses be recorded for this companion scenario ? The Ad agency on this project incurs $1,500 of expenses in May, $3,000 in June, and none in July? The answer is June! Matching says the expenses should follow the revenue. 4-12 Review When would revenue be recorded for the following scenario . . . Sell plane ticket on September 1 for a flight on October 15? The answer is October – when the service is provided!
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
4-13 Review When would expenses be recorded for the following scenario . . . The airline pays pilot salaries on October 7 th for the week ended September 30th? The answer is September – the pilots provided labor services for September flights during that month. 4-14 CURRENT: Cash Accounts receivable Accrued revenue Inventory Prepaid expenses LONG TERM: Fixed assets Allowance for doubtful accounts Accumulated depreciation STOP Ignoring the 1 st word Of an asset defintion It is ? ASSET MINUS THE ASSOCIATED CONTRA-ASSET = “NET BOOK VALUE” TERMINOLOGY RECOGNIZED: Recorded to the ledger. . i.e incorporated into the financial statements REALIZED: Physical receipt/ giving. Not necessarily “recognized” at the same time as “realized” HISTORICAL COST: What we paid for something. It is GAAP in almost every instance.
Background image of page 4
Image of page 5
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 12/25/2011 for the course ECON 3A taught by Professor Loster during the Fall '07 term at UCSB.

Page1 / 17

3achapter4 - Chapter 4 Accrual Accounting Concepts...

This preview shows document pages 1 - 5. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online