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Check your anewers at the end of the chapter ASSESS YOUR PROGRESS > Review Questions . Whar is the difference berween cash basis accounting and aecrual basis accounting 2. Which method of accounting (cash or sccrual basis) is consistent with Generally Aecepred Accounting Principles? J. Which accounting concept or principle requires companies to divide their activines inro small time segments such as months, quarters, or years . What is a fiseal year: Why might companics choose to use a fixcal year that is nor a calendar year?Explanation / Answer
1.) Accrual based accounting records revenues when earned and expense when earned. Cash based accounting records revenue when actual cash is Received and expense when actual cash is paid.
2.) Accrual method of accounting is consistent with GAAP.
3.) The time period concept requires companies to divide their activities into smaller time segments.
4.) Fiscal year is an accounting year of any 12 consecutive months. Comoanies might choose a fiscal year other than calender year, if the low point in business activity is other than 31 december.