Special Purpose Frameworks

Question 1

General Purpose Frameworks

Answer 1

GAAP
IFRS

Question 2

Special Purpose Frameworks

Answer 2

Cash basis
Modified ash basis
Income tax basis
Contractual basis
Regulatory basis

Question 3

Cash Basis Principles

Answer 3

Revenues recognized when they are received, regardless of earned
Expenses recognized when paid
Fixed assets and inventory are expensed, not capitalized
Accruals are not made, prepaid assets not recorded

Question 4

CG Inc. bought a $10,000 piece of equipment during the year. The equipment has a useful life of five years and no salvage value. The following journal entries express the purchase under the cash basis versus GAAP

Answer 4

(DR) Equipment expense 10,000
(CR) Cash 10,000

no depreciation is recorded

Question 5

What is different about the modified cash basis vs. cash?

Answer 5

Transactions involving cash are modified to recognize the benefit or obligation that covers multiple reporting periods.

*All related accounts must use same basis as the modified account.

Question 6

How are cash receipts converted to accrual-based revenue?

Answer 6

Cash basis revenue
+Increase in A/R
+Decrease in unearned revenue
- Decrease in A/R
- Increase in unearned revenue