chapter 3 ntoes

chapter 3 ntoes - I Timing and reporting A Accounting...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
I. Timing and reporting A. Accounting period 1. Information is more valuable if it is delivered in a timely manner a) Because of this, reports are delivered at regular intervals 2. Time period principle assumes that an organization's activities can be divided into specific time periods 3. Type of time periods a) Annual financial statements: report on one year periods b) Fiscal year: any 12 months of activity *Companies with little seasonal variation use a calendar year * Companies experiencing seasonal variation choose a natural business year end, which is when sales activities are at their lowest yearly level c) Interim financial statements: report on a specific number of months B. Accrual basis versus cash basis 1. Accrual basis accounting: uses the adjustment process to recognize revenues when earned and expenses when incurred a) Better reflects business performance because it makes financial statements from one period to another more comparable b) Substitutes a statement of cash flows for benefits of cash basis accounting 2. Cash basis accounting: recognizes revenues when cash is received and records expenses when cash is paid a) Cash basis net income = cash receipts – cash payments b) Not consistent with the generally accepted accounting principles C. Recognizing revenues and expenses 1. Not all activities are complete when financial statements are prepared a) Because of this adjustments must be made to get correct balances
Background image of page 1

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

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 4

chapter 3 ntoes - I Timing and reporting A Accounting...

This preview shows document pages 1 - 2. Sign up to view the full document.

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