MGT120H5 Chapter Notes - Chapter 3: Deferral, Financial Statement, Retained Earnings

• School: UTM
• Department: Management
• Course: MGT120H5
• Professor: Catherine Seguin

Document Summary

A(cid:272)(cid:272)rual vs cash basis a(cid:272)(cid:272)ounting, revenue & e(cid:454)pense re(cid:272)ognition prin(cid:272)iples, adjusting. Journal entries, closing journal entries, evaluating de(cid:271)t-pa(cid:455)ing a(cid:271)ilit(cid:455) When using cash-basis accounting, we only record business transactions involving the receipt or payment of cash. If a customer purchases a good but does not pay until later, we would not record the sale transactions until the cash payment is received. If a business buys inventory on account, it would not be recorded until the company actually pays cash for the products (despite already receiving the supplies). If cash basis was used in the examples above, assets, liabilities, revenue & net income would be understated. Because of this, ifrs & aspe does not permit cash-basis accounting. When using accrual accounting, the receipt or payment of cash is irrelevant to deciding when to record a transaction. What matters is whether the business has acquired an asset, earned revenue, taken on a liability, or incurred an expense.