Cash Basis and Accrual Basis CON Cash Basis of accounting Used when revenue is

Cash basis and accrual basis con cash basis of

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Cash Basis and Accrual Basis CON Cash Basis of accounting Used when revenue is recognized based on cash actually received and expense is recognized only when cash payment is made.
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This method is commonly used by small and petty traders who are unable to advance credit for goods sold.
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Accrual Basis of Accounting Revenue is recognized (earned) once goods are delivered or services rendered to a customer and expense is incurred once benefit is derived or service is provided by another party.
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This method is widely used by most businesses and all corporations. It is the approved basis for recording transactions by International Financial Reporting Standards
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Incomplete Records Accounting records which have not been maintained according to strict double entry principles. Full records may not be available because; the proprietor of the business doesn’t keep a full set of account
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some of the business accounts are accidentally destroyed or lost. there is no legal requirement. the cost of a bookkeeper is not justified. information for preparation of financial statements can be
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Determination of Profit or Loss When accounting records are incomplete, profit may be determined using any of the following approaches;
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Net Assets (Capital) Approach Based on the accounting equation. The only way capital can change is either by introduction of cash/resources, withdrawal of cash/resources, making profit or loss.
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Cash Book (Income) Approach Elements of the financial statements are determined via series of adjusting entries.
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Net Assets (Capital) Approach
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  • Spring '20
  • Dr. ASRAVOR
  • Balance Sheet, Generally Accepted Accounting Principles, net assets,  Explain,  Determine profit

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