MGMT 1A Chapter Notes - Chapter 3.1: Accrual, Financial Statement, Income Statement
Document Summary
Learning objective: explain the accrual basis of accounting and the reasons for adjusting entries. If we could wait to prepare financial statements until a company ended its operations no adjustments would be needed lifetime income it earned. However, most companies need immediate feedback about how well they are doing. (ex. management usually wants monthly financial statements) Irs requires all businesses to file annual tax returns therefore, . Many business transactions affect more than one of these arbitrary time periods we must the economic life of a business into artifical time periods determine the relevance of each business transaction to specific accounting periods. Both small & large companies prepare financial statements periodically (in order to assess their financial condition and results of operations) Interim periods - monthly and quarterly time periods. Most large companies must prepare both quarterly and annual financial statements.
