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Flashcards in Ch 3 Appendix Deck (13):
0

Accrual basis accounting

Recognize revenue when performance obligation is
Satisfied and expenses in period incurred without
Regard to time of cash payment

1

Strict cash basis accounting

Only record revenue when cash is received
Only record expenses when cash is dispersed

2

Main difference of cash basis accounting vs accrual basis accounting?

Timing

3

Modified cash basis, who uses it?

Mixture between cash basis and accrual accounting

Follows strict cash basis but with modifications such as capitalizing, depreciation, recording inventories

Used by doctors, lawyers, accountants, consultants, retail, real estate and agricultural operations

4

What are the two most common types of reversing entries?

Accrued revenues (ex. Accounts receivable for performed service)
Accrued expenses (ex. Wages payable)

5

When a company makes reversing entries it...

Debits all cash payments of expenses to related expense
Account

6

2 types of entries that should be reversed?

1 all accruals should be reversed

2 all deferrals where company debited or credited original
cash transaction to an expense or revenue account

7

Types of entries that should not be reversed?

Adjusting entries for depreciation and bad debts

8

Do accountants always use reversing entries?

No, they are optional

9

Worksheet

Used to adjust account balances and prepare financial
Statements

10

2 Major differences between IFRS and GAAP?

1 IFRS relies more on fair value instead of historical cost

2 IFRS companies do not document their internal control
Systems as well as in the US

11

3 major accounting policies of IFRS?

1 be transparent
2 provide suitable starting point
3 have cost that doesn't exceed benefits

12

3 Similarities between GAAP and IFRS?

1 Same recording procedures: debits and credits,
journal, ledger, etc.

2 IASB and GAAP go beyond basic definitions for key
elements in financial statements like assets, liabilities,
Equity, revenues, expenses

3 trial balance follows same format but with currency
From country of company