Solution_Chpt03_parta - Chapter 3 4 Both revenues and gains...

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Chapter 3 4. Both revenues and gains are inflows of net assets. However, revenues occur in the normal course of operations, whereas gains occur from transactions peripheral to the central activities of the company. An example is selling land at a price above cost (at a gain) for companies not in the business of selling land. Both expenses and losses are outflows of net assets. However, expenses occur in the normal course of operations, whereas losses occur from transactions peripheral to the central activities of the company. An example is a loss suffered from fire damage. 5. Accrual accounting requires recording revenues when earned and recording expenses when incurred, regardless of the timing of cash receipts or payments. Cash basis accounting is recording revenues when cash is received and expenses when cash is paid. 7. The matching principle requires that expenses be recorded when incurred in earning revenue. For example, the cost of inventory sold during a period is recorded in the same period of the sale, not when the goods are
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Solution_Chpt03_parta - Chapter 3 4 Both revenues and gains...

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