ADM 1340 Lecture Notes - Lecture 7: Retained Earnings, Current Asset, Trial Balance
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ADM 1340 Full Course Notes
Verified Note
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Document Summary
Events are recognized in the period that cash is pair or received. Revenue is recorded only when cash is received. Expenses are recorded only when cash is paid. Transactions are recorded in the periods in which the events occur. Revenue is recorded when earned, rather than when cash is received. Expenses are recorded when goods or services are consumed or used, rather than when cash is paid. Accrual basis accounting: better reflects the profits of the company. Calculate the company"s profit under the cash basis of accounting and under the accrual basis of accounting. 2,000-insurance coverage (1/2 1st year, 1/2 2nd year) 4,200-expects to owe in income tax at end of year: cash basis. Revenue is recognized (recorded) when there is an increase in future economic benefits arising from an increase in an asset or a decrease in a liability, due to ordinary activities. The sales or performance effort is substantially complete.
