(DS) Accounting Methods Flashcards
1
Q
Cash - basis Accounting
A
Revenue and expenses are recognized at the time they are received or incurred.
- SOLE PROPRIETORS use most frequently
- CHECKING ACCOUNT - TRACKIING
2
Q
Accrual Accounting
A
Revenue and expenses are recognized at the time they EARNED or incurred, whether or not cash exchanges hands.
- provides a better picture of LONG-TERM FIRM HEALTH
- LARGE CORPORATIONS
- Required by IRS above a certain size firm
3
Q
Double Entry Book-Keeping
A
Keeps track of transactions chronologically in a journal, which is then posted to a ledger and grouped by accounts. It is used in accrual accounting
4
Q
Modified Accrual Accounting
A
This is a combo of both cash-basis and accrual accounting, and is most typically used by architecture firms
-Revenue is based only on invoiced fees and expense amounts billed or invoiced (as opposed to earned)
