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TMUp 1st MCB for lecture

TMUp 1st MCB for lecture - Thai-Me Up 1st Quarter continued...

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Thai-Me Up 1 st Quarter continued On a Modified Cash-basis For April 11, 2011
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Presumably, you have completed the 1 st quarter financial worksheet and T-accounts and verified that all your numbers are correct. We jumped-right-in and now you know that accounting is generally about classifying numbers and recording them in certain places. Most transactions are routine and repetitive. But a few call for interpretation and judgment. This is where you’ll earn that fat paycheck. You want difficult situations because that is where your skills will shine. So pay attention. But relax because over-thinking will be a source of frustration.
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Accounting is about classifying numbers and recording them in: a)A worksheet – similar to a general ledger. b)On T-accounts – representing journals. And then aggregating this on: c)Financial statements: the Balance Sheet & Income Statement. These steps promote accuracy and also provide cross-references on the overall effect of the transactions on the company’s financial performance and position.
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We started with accrual accounting , but we need to walk-thru Modified Cash-basis Accounting because it is used for small-business income tax computations and it also provides a good basis for understanding the Statement of Cash Flows, which we will see soon. Modified Cash-basis accounting only records cash transactions (with one exception). So it excludes the current accounts on the balance sheet. Thus, it is a simplification of the accrual approach.
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