C6 Accounting Methods and Concepts

Question 1

cash basis accounting method

Answer 1

you record the revenue when the company is paid, and you record expenses when they are paid, not incurred

Question 2

accrual basis accounting method

Answer 2

you record the revenue when it is earned and realizable, and you record expenses when they are incurred regardless of whether they have been paid.

Question 3

earned and realizable criterion for revenue on the accrual method accounting

Answer 3

• Earned: is satisfied when the vender satisfactorily performs on its contracts with the customer
• Realizable: means that there is an actual expectation of collecting the money for the job for the job from the customer