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Comparison Of Cash And Accrual Methods Of Accounting
In accounting, a basis of accounting is a method used to define, recognise, and report financial transaction A financial transaction is an Contract, agreement, or communication, between a buyer and seller to exchange goods, Service (economics), services, or assets for payment. Any transaction involves a change in the status of the finances of two or mo ...s. The two primary bases of accounting are the cash basis of accounting, or cash accounting, method and the accrual accounting method. A third method, the modified cash basis, combines elements of both accrual and cash accounting. * The cash basis method records income and expenses when cash is actually paid to or by a party. * The accrual method records income items when they are earned and records deductions when expenses are incurred. * The modified cash basis records income when it is earned but deductions when expenses are paid out. Both methods have advantages and disadvantages, and can be used in a wide range of si ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Financial Transaction
A financial transaction is an Contract, agreement, or communication, between a buyer and seller to exchange goods, Service (economics), services, or assets for payment. Any transaction involves a change in the status of the finances of two or more businesses or individuals. A financial transaction always involves one or more financial asset, most commonly money or another valuable item such as gold or silver. There are many types of financial transactions. The most common type, purchases, occur when a good, service, or other commodity is sold to a consumer in exchange for money. Most purchases are made with cash payments, including Cash, physical currency, debit cards, or cheques. The other main form of payment is credit, which gives immediate access to funds in exchange for repayment at a later date. History There is no evidence to support the theory that ancient civilizations worked on systems of barter. Instead, most historians believe that ancient cultures worked on princi ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Matching Principle
In accrual basis accounting, the matching principle (or expense recognition principle) dictates that an expense should be reported in the same period as the corresponding revenue is earned. The revenue recognition principle states that revenues should be recorded in the period in which they are earned, regardless of when the cash is transferred. By recognising costs in the period they are incurred, a business can determine how much was spent to generate revenue, thereby reducing discrepancies between when costs are incurred and when revenue is realised. In contrast, cash basis accounting requires recognising an expense when the cash is paid, irrespective of when the expense was incurred.Accounting Principles by Wild, Shaw, Chiappetta If no cause-and-effect relationship exists (e.g., a sale is impossible), costs are recognised as expenses in the accounting period in which they expired, i.e., when the product or service has been used up or consumed (e.g., spoiled, dated, or subst ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Accounting Systems
Accounting software is a computer program that maintains account books on computers, including recording transactions and account balances. It may depend on virtual thinking. Depending on the purpose, the software can manage budgets, perform accounting tasks for multiple currencies, perform payroll and customer relationship management, and prepare financial reporting. Work to have accounting functions be implemented on computers goes back to the earliest days of electronic data processing. Over time, accounting software has revolutionized from supporting basic accounting operations to performing real-time accounting and supporting financial processing and reporting. Cloud accounting software was first introduced in 2011, and it allowed the performance of all accounting functions through the internet. Modules Accounting software is typically composed of various modules, with different sections dealing with particular areas of accounting. Among the most common are: ;Core ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Corporate Taxation In Canada
A corporation or body corporate is an individual or a group of people, such as an association or company, that has been authorized by the state to act as a single entity (a legal entity recognized by private and public law as "born out of statute"; a legal person in a legal context) and recognized as such in 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: whether they can issue share capital, stock, or 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, sol ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Corporate Taxation In The United States
Corporate tax is imposed in the United States at the federal, most state, and some local levels on the income of entities treated for tax purposes as corporations. Since January 1, 2018, the nominal federal corporate tax rate in the United States of America is a flat 21% following the passage of the Tax Cuts and Jobs Act of 2017. State and local taxes and rules vary by jurisdiction, though many are based on federal concepts and definitions. Taxable income may differ from book income both as to timing of income and tax deductions and as to what is taxable. The corporate Alternative Minimum Tax was also eliminated by the 2017 reform, but some states have alternative taxes. Like individuals, corporations must file tax returns every year. They must make quarterly estimated tax payments. Groups of corporations controlled by the same owners may file a consolidated return. Some corporate transactions are not taxable. These include most formations and some types of mergers, acqui ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Personal Taxes
Personal may refer to: Aspects of persons' respective individualities * Privacy * Personality * 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'' (Men of Vizion album), 1996 * Personal (George Howard album), 1990 * Personal (Florrie album), 2023 * ''Personal'', an album by Quique González, or the title song * "Message"/"Personal", a 2003 song by Aya Ueto * "Personal" (Hrvy song), a song from ''Talk to Ya'' * "Personal" (The Vamps song), a song from ''Night & Day'' *"Personal", a song by Kehlani from ''SweetSexySavage'' *"Personal", a song by Olly Murs from his 2012 album '' Right Place Right Time'' *"Personal", a song by Against the Current from their 2018 album '' Past Lives'' Bo ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [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 cash, accrual, and other methods approved by the Internal Revenue Service (IRS) including combinations. After choosing a tax accounting method, undesection 446(b)the IRS has wide discretion to re-comput ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Revenue Recognition
In accounting, the revenue recognition principle states that revenues are earned and recognized when they are realized or realizable, no matter when cash is received. It is a cornerstone of accrual accounting together with the matching principle. Together, they determine the accounting period in which revenues and expenses are recognized. In contrast, the cash accounting recognizes revenues when cash is received, no matter when goods or services are sold. Cash can be received in an earlier or later period than when obligations are met, resulting 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. Rules Under the revenue recognition principle, when a company received an advance payment, it is not recognized as revenue but as liabilities in the form of deferred income (which requires the company to perform certain obligations), until the following condi ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Deferral
In accounting, a deferral is any account where the income or expense is not recognised until a future date. In accounting, deferral refers to the recognition of revenue or expenses at a later time than when the cash transaction occurs. This concept is used to align the reporting of financial transactions with the periods in which they are earned or incurred, according to the matching principle and revenue recognition principle. Deferrals are recorded as either assets or liabilities on the balance sheet until they are recognized in the appropriate accounting period. Two common types of deferrals are deferred expenses and deferred income. A deferred expense represents cash paid in advance for goods or services that will be consumed in future periods. On the other hand, deferred income (or deferred revenue) is a liability that arises when payment is received for goods or services that have yet to be delivered or fulfilled. Deferred charge A deferred charge is a cost recorded ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Accrual
In accounting and finance, an accrual is an asset or liability that represents revenue or expenses that are receivable or payable but which have not yet been paid. In accrual accounting, the term accrued revenue refers to income that is recognized at the time a company delivers a service or good, even though the company has not yet been paid. Likewise, the term accrued expense refers to liabilities that are recognized when a company receives services or goods, even though the company has not yet paid the provider. Accrued revenue is often recognised as income on an income statement and represented as an accounts receivable on the balance sheet. When the company is paid, the income statement remains unchanged, although the accounts receivable is adjusted and the cash account increased on the balance sheet. On the other hand, an accrued expense is recognised as an expense on the income statement and represented as a liability on the balance sheet. Once payment is made, the incom ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Claim Of Right Doctrine
In the tax law of the United States the claim of right doctrine causes a taxpayer to 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 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 taxpayer who receives it ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Adjusting Entries
In accounting, adjusting entries are journal entries usually made at the end of an accounting period to allocate income and 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-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; the account is to be expensed either with th ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
