Special Purpose Frameworks

Question 1

Cash Basis

Answer 1

No Inventory Account (expense)

No A/R

Revenue and expenses are recognized when cash is received/given

Simple and less expensive than Accrual

Question 2

Modified Cash

Answer 2

Recognize revenues and expenses on constructive receipt of cash payment (therefore NO A/R)

Use the accrual basis to record certain balance sheet items such as fixed assets and long-term loans payable.

uses double-entry accounting

Question 3

Tax Basis

Answer 3

what entity uses to file it’s tax returns

Title - statement of revenues collected and expenses paid

Question 4

Retained earnings

Answer 4

is used under the cash basis, modified cash basis, and accrual basis.