Special Purpose Frameworks

Question 1

When is revenue recognized for cash basis?

Answer 1

when cash is received

Question 2

When are expenses recognized for cash basis?

Answer 2

when cash is paid

Question 3

What are the advantages & disadvantages of cash basis?

Answer 3

Pro: simplicity, ease of understanding and low cost
Cons: ignores receivables/payables, not GAAP

Question 4

When is revenue recognized for modified cash basis?

Answer 4

when cash is received

Question 5

When are expenses recognized for modified cash basis?

Answer 5

when cash is paid

Question 6

What are the advantages & disadvantages of modified cash basis?

Answer 6

Pros: more comprehensive than cash basis
Cons: not fully representative of SFP, not GAAP

Question 7

When is revenue/expense recognized for income tax basis/regulatory/contract?

Answer 7

in accordance with tax laws, regulations, and contracts

Question 8

What is the balance sheet under cash basis?

Answer 8

statement of cash & equity arising from cash transactions

Question 9

what is the balance sheet under modified cash basis?

Answer 9

statement of assets, liabilities, and equity - modified cash basis

Question 10

what is the balance sheet under income tax basis?

Answer 10

statement of assets & liabilities - income tax basis

Question 11

what is the balance sheet under regulatory basis?

Answer 11

statement of financial position - regulatory basis

Question 12

what is the balance sheet under contractual basis?

Answer 12

statement of assets & liabilities - contractual basis

Question 13

what is the income statement under cash basis?

Answer 13

statement of cash receipts and disbursements

Question 14

what is the income statement under modified cash basis?

Answer 14

statement of revenues and expenses - modified cash basis

Question 15

what is the income statement under income tax basis?

Answer 15

statement of income - income tax basis

Question 16

what is the income statement under regulatory basis?

Answer 16

statement of income - regulatory basis

Question 17

what is the income statement under contractual basis?

Answer 17

statement of revenue & expenses - contractual basis

Question 18

are cash flows required for special purpose frameworks?

Answer 18

No

Question 19

Adjusting for changes in AR

Answer 19

Add: Increase in AR
Less: Decrease in AR

Question 20

What do increases in AR mean?

Answer 20

Revenue earned > Revenue collected

Question 21

What do decreases in AR mean?

Answer 21

Revenue earned < Revenue collected

Question 22

Adjusting for changes in AP

Answer 22

Less: Increase in AP
Add: Decrease in AP

Question 23

What do increases in AP mean?

Answer 23

Expenses incurred > Expenses paid

Question 24

What do decreases in AP mean?

Answer 24

Expenses incurred < Expenses paid

Question 25

Adjusting for changes in prepaids

Answer 25

Add: Increase in prepaid expense Less: Decrease in prepaid expense

Question 26

What do increases in prepaid expense mean?

Answer 26

Expenses paid > expenses incurred

Question 27

What do decreases in prepaid expenses mean?

Answer 27

Expenses paid < expenses incurred

Question 28

Adjusting for changes in accrued expenses?

Answer 28

Add: Decrease in accrued expense Less: Increase in accrued expense

Question 29

What do increases in accrued expenses mean?

Answer 29

Expenses incurred > Expenses paid

Question 30

What do decreases in accrued expenses mean?

Answer 30

Expenses incurred < Expenses paid

Question 31

Adjust for changes in unearned revenue

Answer 31

Less: increase in unearned revenue Add: decrease in unearned revenue

Question 32

What do increases in unearned revenue mean?

Answer 32

Revenue earned < Revenue collected

Question 33

What do decreases in unearned revenue mean?

Answer 33

Revenue earned > revenue collected

Question 34

Adjusting for changes in accrued revenue

Answer 34

Add: Increases in accrued revenue Less: Decreases in accrued revenue

Question 35

What do increases in accrued revenue mean?

Answer 35

Revenue earned > revenue collected

Question 36

What do decreases in accrued revenue mean?

Answer 36

Revenue earned < revenue collected