Basis Of Accounting
   HOME



Basis Of Accounting
A basis of accounting is the time various financial transactions are recorded. The cash basis (EU VAT vocabulary ''cash accounting'') and the accrual basis are the two primary methods of tracking income and expenses in accounting. Both can be used in a range of situations, from the accounts of a whole country or a large corporation to those of a small business or an individual. In many cases, regulatory bodies require individuals, businesses or corporations to use one method or the other. When this is not the case, the choice of which to use is an important decision, as both methods have advantages and disadvantages. Accrual basis The accrual method records income items when they are ''earned'' and records deductions when expenses are ''incurred''.Treas. Reg., 26 C.F.R. § 1.446-1(c)(1)(ii) For a business invoicing for an item sold, or work done, the corresponding amount will appear in the books even though no payment has yet been received, and debts owed by the business sh ...
[...More Info...]      
[...Related Items...]     OR:     [Wikipedia]   [Google]   [Bing]   [Yahoo]   [DuckDuckGo]   [Baidu]  


Cash Method Of Accounting
The cash method of accounting, also known as cash-basis accounting, cash receipts and disbursements method of accounting or cash accounting (the EU VAT directive vocabulary A vocabulary is a set of familiar words within a person's language. A vocabulary, usually developed with age, serves as a useful and fundamental tool for communication and learning, acquiring knowledge. Acquiring an extensive vocabulary is one ... Article 226) records revenue when cash is received, and expenses when they are paid in cash. As a basis of accounting, this is in contrast to the alternative accrual method which records income items when they are ''earned'' and records deductions when expenses are ''incurred'' regardless of the flow of cash. Cash method of accounting in the United States (GAAP) Use in contract accounting The cash method of accounting has historically been one of the four methods of recognizing revenues and profits on contracts, the other ones being the accrual method, the ...
[...More Info...]      
[...Related Items...]     OR:     [Wikipedia]   [Google]   [Bing]   [Yahoo]   [DuckDuckGo]   [Baidu]  


Matching Principle
In accrual accounting, the matching principle instructs that an expense should be reported in the same period in which the corresponding revenue is earned, and is associated with accrual accounting and the revenue recognition principle states that revenues should be recorded during the period in which they are earned, regardless of when the transfer of cash occurs. By recognizing costs in the period they are incurred, a business can see how much money was spent to generate revenue, reducing "noise" from timing mismatch between when costs are incurred and when revenue is realized. Conversely, Cash_method_of_accounting, cash basis accounting calls for the recognition of an expense when the cash is paid, regardless of when the expense was actually incurred.Accounting Principles by Wild, Shaw, Chiappetta If no cause-and-effect relationship exists (''e.g.,'' a sale is impossible), costs are recognized as expenses in the accounting period they expired: ''i.e.,'' when have been used up o ...
[...More Info...]      
[...Related Items...]     OR:     [Wikipedia]   [Google]   [Bing]   [Yahoo]   [DuckDuckGo]   [Baidu]  


picture info

Corporate Taxation In Canada
A corporation is an organization—usually a group of people or a company—authorized by the State (polity), state to act as a single entity (a legal entity recognized by private and public law "born out of statute"; a legal person in legal context) and recognized as such in Corporate law, law for certain purposes. Early incorporated entities were established by charter (i.e. by an ''ad hoc'' act granted by a monarch or passed by a parliament or legislature). Most jurisdictions now allow the creation of new corporations through List of company registers, registration. Corporations come in many different types but are usually divided by the law of the jurisdiction where they are chartered based on two aspects: by whether they can issue share capital, stock, or by whether they are formed to make a profit (accounting), profit. Depending on the number of owners, a corporation can be classified as ''aggregate'' (the subject of this article) or ''corporation sole, sole'' (a legal e ...
[...More Info...]      
[...Related Items...]     OR:     [Wikipedia]   [Google]   [Bing]   [Yahoo]   [DuckDuckGo]   [Baidu]  


picture info

Corporate Taxation In The United States
A corporation is an organization—usually a group of people or a company—authorized by the State (polity), state to act as a single entity (a legal entity recognized by private and public law "born out of statute"; a legal person in legal context) and recognized as such in Corporate law, law for certain purposes. Early incorporated entities were established by charter (i.e. by an ''ad hoc'' act granted by a monarch or passed by a parliament or legislature). Most jurisdictions now allow the creation of new corporations through List of company registers, registration. Corporations come in many different types but are usually divided by the law of the jurisdiction where they are chartered based on two aspects: by whether they can issue share capital, stock, or by whether they are formed to make a profit (accounting), profit. Depending on the number of owners, a corporation can be classified as ''aggregate'' (the subject of this article) or ''corporation sole, sole'' (a legal e ...
[...More Info...]      
[...Related Items...]     OR:     [Wikipedia]   [Google]   [Bing]   [Yahoo]   [DuckDuckGo]   [Baidu]  


Personal Taxes
Personal may refer to: Aspects of persons' respective individualities * Privacy Privacy (, ) is the ability of an individual or group to seclude themselves or information about themselves, and thereby express themselves selectively. The domain of privacy partially overlaps with security, which can include the concepts of a ... * Personality Personality is the characteristic sets of behaviors, cognitions, and emotional patterns that are formed from biological and environmental factors, and which change over time. While there is no generally agreed-upon definition of personality, mos ... * Personal, personal advertisement, variety of classified advertisement used to find romance or friendship Companies * Personal, Inc., a Washington, D.C.-based tech startup * The Personal, a Canadian-based group car insurance and home insurance company * Telecom Personal, a mobile phone company in Argentina and Paraguay Music * ''Personal'' (album), the debut album by R&B group Men ...
[...More Info...]      
[...Related Items...]     OR:     [Wikipedia]   [Google]   [Bing]   [Yahoo]   [DuckDuckGo]   [Baidu]  


Tax Accounting
U.S. tax accounting refers to accounting for tax purposes in the United States. Unlike most countries, the United States has a comprehensive set of accounting principles for tax purposes, prescribed by tax law, which are separate and distinct from Generally Accepted Accounting Principles. Basic rules The Internal Revenue Code governs the application of tax accounting.Section 446sets the basic rules for tax accounting. Tax accounting undeemphasizes consistency for a tax accounting method with references to the applied financial accounting to determine the proper method. The taxpayer must choose a tax accounting method using the taxpayer's financial accounting method as a reference point. Types of tax accounting methods Proper accounting methods are described iwhich permits Accounting methods#Cash basis, cash, Accounting methods#Accrual basis, accrual, and other methods approved by the Internal Revenue Service (IRS) including combinations. After choosing a tax accounting metho ...
[...More Info...]      
[...Related Items...]     OR:     [Wikipedia]   [Google]   [Bing]   [Yahoo]   [DuckDuckGo]   [Baidu]  


Revenue Recognition
The revenue recognition principle is a cornerstone of accrual accounting together with the matching principle. They both determine the accounting period in which revenues and expenses are recognized. According to the principle, revenues are recognized when they are realized or realizable, and are earned (usually when goods are transferred or services rendered), no matter when cash is received. In cash accounting—in contrast—revenues are recognized when cash is received no matter when goods or services are sold. Cash can be received in an earlier or later period than obligations are met (when goods or services are delivered) and related revenues are recognized that results in the following two types of accounts: * Accrued revenue: Revenue is recognized before cash is received. * Deferred revenue: Revenue is recognized when cash is received. Revenue realized during an accounting period is included in the income. International Financial Reporting Standards criteria The Interna ...
[...More Info...]      
[...Related Items...]     OR:     [Wikipedia]   [Google]   [Bing]   [Yahoo]   [DuckDuckGo]   [Baidu]  


Deferral
A deferral, in '' accrual accounting'', is any account where the income or expense is not recognised until a future date ( accounting period), e.g. annuities, charges, tax A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal person, legal entity) by a governmental organization in order to fund government spending and various public expenditures (regiona ...es, income Income is the Consumption (economics), consumption and saving opportunity gained by an entity within a specified timeframe, which is generally expressed in monetary terms. Income is difficult to define conceptually and the definition may be diff ..., etc. The deferred item may be carried, dependent on type of deferral, as either an asset or liability. See also accrual. Deferrals are the consequence of the revenue recognition principle which dictates that revenues be recognized in the period in which they occur, and the matching principle I ...
[...More Info...]      
[...Related Items...]     OR:     [Wikipedia]   [Google]   [Bing]   [Yahoo]   [DuckDuckGo]   [Baidu]  


Accrual Basis
Accrual (''accumulation'') of something is, in finance, the adding together of interest or different investments over a period of time. Accruals in accounting For example, a company delivers a product to a customer who will pay for it 30 days later in the next fiscal year, which starts a week after the delivery. The company recognizes the proceeds as a revenue in its current income statement still for the fiscal year of the delivery, even though it will not get paid until the following accounting period. The proceeds are also an accrued income (asset) on the balance sheet for the delivery fiscal year, but not for the next fiscal year when cash is received. Similarly, the salesperson who sold the product earned a commission at the moment of sale (or delivery). The company will recognize the commission as an expense in its current income statement, even though the salesperson will actually get paid at the end of the following week in the next accounting period. The commission is a ...
[...More Info...]      
[...Related Items...]     OR:     [Wikipedia]   [Google]   [Bing]   [Yahoo]   [DuckDuckGo]   [Baidu]  


Claim Of Right Doctrine
In the tax law of the United States the claim of right doctrine causes a taxpayer to Recognition (tax), recognize income if they receive the income even though they do not have a fixed right to the income. For the income to qualify as being received there must be a receipt of cash or property that ordinarily constitutes income rather than loans or gifts or deposits that are returnable, the taxpayer needs unlimited control on the use or disposition of the funds, and the taxpayer must hold and treat the income as its own. This Case law, law is largely created by the courts, but some aspects have been codified into the Internal Revenue Code. History The claim of right doctrine, as it dictates whether the "right" to the income subject to a contingency that may take the income away is taxable in the US, originated in the ''North American Oil Consolidated v. Burnet'' decision. This court decision said that a taxpayer's income subject to a contingency that may take away the income but a ...
[...More Info...]      
[...Related Items...]     OR:     [Wikipedia]   [Google]   [Bing]   [Yahoo]   [DuckDuckGo]   [Baidu]  


Adjusting Entries
In accounting/accountancy, adjusting entries are general journal, journal entries usually made at the end of an accounting period to allocate income and expense, expenditure to the period in which they actually occurred. The revenue recognition principle is the basis of making adjusting entries that pertain to unearned and accrued revenues under Accrual, accrual-basis accounting. They are sometimes called Balance Day adjustments because they are made on balance day. Based on the matching principle of accrual accounting, revenues and associated costs are recognized in the same accounting period. However the actual cash may be received or paid at a different time. Types of adjusting entries Most adjusting entries could be classified this way: Prepayments Adjusting entries for prepayments are necessary to account for cash that has been received prior to delivery of goods or completion of services. When this cash is paid, it is first recorded in a prepaid expense asset account; t ...
[...More Info...]      
[...Related Items...]     OR:     [Wikipedia]   [Google]   [Bing]   [Yahoo]   [DuckDuckGo]   [Baidu]