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Financial Reporting 9/10/17 :<3: (Cash and accruals accounting…
Financial Reporting 9/10/17 :<3:
Cash and accruals accounting
Accruals basis of accounting
reflects the economy of an entity
allows matching related revenues and expenses
recognise revenues and expenses
as they arise
rather than as paid
Limitations of cash measurement
transfer to personal bank account
rent
local charges
energy cost
interest
stock not yet sold
payments to suppliers
receipts from customers
equipment
lease premium
loan from bank
Pacioli's products
payments
receipts
Accounting and economic activity
accounting provides info about the economic resources
inputs and outputs
service
retail
manufacturing
financial statement should reflect the nature of the business
The accounting equation and double entry bookkeeping
assets - liabilities = owner's interest (A = L + OI) / (OI = Rev - Exp)
liabilities / owner's interest / revenue
debit (decreases)
credit (increases)
assets / expenses
credit (decreases)
debit (increases)
debits always equals credits
- T account