CHAPTER 4: BASES OF ACCOUNTING (CASH BASIS AND ACCRUAL BASIS OF ACCOUNTING) ASSIGNMENT # 1
Chapter 4 BASES OF ACCOUNTING LEARNING OUTCOMES: INTRODUCTION CASH BASIS OF ACCOUNTING ACCRUAL BASIS OF ACCOUNTING INTRODUCTION: INTRODUCTION TO THE CHAPTER (LINK) The main objective of accounting is to determine profit earned on loss incurred by a business at the end of each accounting period. There are two bases of ascertaining profit or loss: 1. Cash Basis of Accounting 2. Accrual or Mercantile Basis of Accounting CASH BASIS OF ACCOUNTING: CASH BASIS OF ACCOUNTING (LINK) Cash basis of accounting is a system in which transactions are recorded when cash is received or paid. * Revenues is recorded when cash is received. For example, good sold on credit will be recorded only when sale proceeds are received. * Similarly, expenses are recorded when cash is paid for them. For example, if salary for the month of December is paid in January, then it will be recorded in January. * So, under Cash Basis of ...