the adjustment process
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what's the difference between cash basis accounting and accrual basis accounting
Cash basis--> only recorded when cash is received or paid, not allowedunder GAAp
Accrual basis--> revenue is recorded when earned and expensesare recorded when incurred, used by most businesses
what is the Revenue Recognition principle?
Record revenue when earned(when a project is finished), revenue is based on selling price(e.g. sale price)
what is the difference between revenues and gains?
Revenue --> sales to customers,services etc.
Gains --> sale price in excess of book value (real estate)
what is the difference between deferrals and accruals?
Deferrals:cash is involved prior to recognition
Accruals:cash involved after recognition
What is the difference between a deffered expense and an accrued expense?
Deffered expense: advance payments for future expenses
Accrued expense:expenses a business has incurr3ed but has not yet been paid
what is the difference between deferred revenues and accrued revenues?
Deffered revenues: occurs when a company receives cash before it does the work or delivers a product
Accrued Revenue:Company performs a service or delivers a product but has not yet been paid
what is the booking sentence if you paid rent in advance and how can you adjust it on dec. 31
Prepaid Rent/ Cashr
Rent Expense/Prepaid rent
what is the booking sentence if you purchased 500 in booking supplies and by dec.31.only 100 worth of supplies remain on hand?
supplies expense/office supplies 400
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