01:198:170 Lecture Notes - Lecture 3: Disclose, Deferral, Accrual

• School: Rutgers University
• Department: Computer Science
• Course: 01:198:170
• Professor: F Geraci

Document Summary

Management normally likes creating financial statements monthly for immediate feedback. Time-period assumption- time periods accountants divide the economic life of business into. Accounting time periods- usually month, quarter, or year. Fiscal year- start of accounting period to 12 months later on to the last day of the month. Cash-basis accounting- record transaction when the cash is received, not when performed. Accrual-basis accounting- record financial transactions that change the financial statement in the period that event occurs. Calculating revenue: someone pays for your service on account. You calculate this transaction when the service was performed, not when the cash is received. Performance obligation- obligated to do a job if company agrees to perform a service. Once the performance obligation is satisfied revenue is recognized (in fin. statements) Report expenses in the same period when revenues were recorded. Entries are adjusted to ensure that both recognition principles are followed. Need to make sure the trial balance is up to date.