Ch 3 Appendix Flashcards
Strict cash basis accounting
Only record revenue when cash is received
Only record expenses when cash is dispersed
Accrual basis accounting
Recognize revenue when performance obligation is
Satisfied and expenses in period incurred without
Regard to time of cash payment
Main difference of cash basis accounting vs accrual basis accounting?
Timing
Modified cash basis, who uses it?
Mixture between cash basis and accrual accounting
Follows strict cash basis but with modifications such as capitalizing, depreciation, recording inventories
Used by doctors, lawyers, accountants, consultants, retail, real estate and agricultural operations
What are the two most common types of reversing entries?
Accrued revenues (ex. Accounts receivable for performed service) Accrued expenses (ex. Wages payable)
When a company makes reversing entries it…
Debits all cash payments of expenses to related expense
Account
2 types of entries that should be reversed?
1 all accruals should be reversed
2 all deferrals where company debited or credited original
cash transaction to an expense or revenue account
Types of entries that should not be reversed?
Adjusting entries for depreciation and bad debts
Do accountants always use reversing entries?
No, they are optional
Worksheet
Used to adjust account balances and prepare financial
Statements
2 Major differences between IFRS and GAAP?
1 IFRS relies more on fair value instead of historical cost
2 IFRS companies do not document their internal control
Systems as well as in the US
3 major accounting policies of IFRS?
1 be transparent
2 provide suitable starting point
3 have cost that doesn’t exceed benefits
3 Similarities between GAAP and IFRS?
1 Same recording procedures: debits and credits,
journal, ledger, etc.
2 IASB and GAAP go beyond basic definitions for key
elements in financial statements like assets, liabilities,
Equity, revenues, expenses
3 trial balance follows same format but with currency
From country of company
