Financial Exam 1 Review

Financial Exam 1 Review - Accrual basis recognizes revenues...

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Accrual basis: recognizes revenues and expenses when they actually occur even if cash doesn’t change hands - Revenues are recognized when the revenue recognition principle is met - Expenses are matched against revenues Cash basis: recognizes revenues and expenses when they are paid in cash/ received in cash - Easy to manipulate - Does not allow you to record credit Revenue Recognition: to be recognized, revenue must be earned and realized - Earned: goods are delivered/ services performed - Realized: claim to cash Period Costs: are those costs that are matched against revenues passed on a time period basis, treated as expenses in the time period in which they are incurred. - General and administrative expenses are period costs Product Costs: are those costs that are matched against products and capitalized as the cost of inventory awaiting sale Cost Recovery: Some purchases of goods or services are recorded as assets (capitalized) because their costs are expected to be recovered in future periods. -
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Financial Exam 1 Review - Accrual basis recognizes revenues...

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