22107 Lecture Notes - Lecture 4: Accrual, Trial Balance, Financial Statement
Document Summary
This is an application of the revenue recognition principle and matching principles. Revenues such as your wages would be recorded when you earn them regardless of when payment is received. The accrual basis provides a better representation of income over the two shorter periods of time. Generally accepted accounting principles require the accrual basis, income statements report accrual-based profit or loss. However, cash basis information is also useful in understanding the financial condition of a company. A company that generates accrual income but never generates cash is a company that will soon fail. Gowthorpe and amat creative accounting; some ethical issues: Macro getting accounting standards best suit you / your clients. (cid:858)pooli(cid:374)g(cid:859) (cid:448)e(cid:396)ses (cid:858)pu(cid:396)(cid:272)hasi(cid:374)g(cid:859) Micro - using the choice available to show the best financial picture of the company. To ensure that revenues and expenses are properly recorded under an accrual basis, accounting information systems use adjusting journal entries.
