MGMT 1A Lecture 6: Lecture 6- Accrual Accounting & Trial Balance
Document Summary
Mgmt 1a lecture 6 notes - accrual accounting & trial balance. Cash method: recognize revenue when you receive the cash; recognize expense when actually pay (typically what is used for personal tax return) Accrual method: recognize revenue when earned, measurable, and collectable; recognize expense whe(cid:374) i(cid:374)(cid:272)urred (cid:862)(cid:373)at(cid:272)hi(cid:374)g(cid:863) (cid:894)what is usually used (cid:271)y (cid:272)orporatio(cid:374)s(cid:895) Gaap (generally accepted accounting principles) - use accrual accounting. *note: statement of cash flows extracts accruals out of the statements. (cid:862)a(cid:272)(cid:272)rual(cid:863) = used to refer to the a(cid:272)(cid:272)ou(cid:374)ti(cid:374)g (cid:373)ethod which actually records accruals and deferrals. Contemporaneous exchange: cash comes in at the exact time that you are delivering the goods (ex. retail) Accrual: good is delivered, but given some time period (like 30 days) before payment is income earned before $ received due. Expense incurred before $ paid (impacts income statement now, impacts cash later) Deferral: payment received in advance, before the good is delivered income earned after $ received.
