MGT120H5 Chapter 3: All About Accrual Accounting
12
MGT120H5 Full Course Notes
Verified Note
12 documents
Document Summary
Accounting info can be prepared using either the cash basis or the accrual basis of accounting. Cash-basis accounting: record only business transactions involving the receipt or payment of cash, all other business transactions involving the receipt or payment of cash. Accrual accounting: the receipt or payment of cash is irrelevant to deciding transaction should be recorded, what matters is whether the business has acquired an asset, earned revenue, taken on a liability, or incurred an expense. If it has, the transaction is recorded in the accounting records. The cash basis of accounting is not permitted by ifrs or aspe because it is consistent with the conceptual framework of accounting introduced in chapter 1. Ifrs and aspe have revenue recognition principles which specify the conditions that must be met before a business can recognize revenue from a transaction: these principles are generally consistent across the two sets of standards. At the end of a period, business prepares its financial statements.
