I need solution Check your answers at the end of the chapter. ASSESS YOUR PROGRE
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Question
I need solution
Check your answers at the end of the chapter. ASSESS YOUR PROGRESS > Review Questions 1. What is the difference berween cash basis accounting and accrual basis accounting? 2. Which method of accounting (cash or accrual basis) is consistent with Generally Accepted Accounting Principles? 3. Which accounting concept or principle requires companies to divide their activities into small time segments such as months, quarters, or years? 4. What is a fiscal year? Why might companies choose to use a fiscal year that is not a calendar year?Explanation / Answer
1. In cash basis of accounting while preparing the Income & Expense account or Profit/Loss Account, the expenses and revenue are taken on the basis of how much cash has been paid or received respectively during the period. In this basis no consideration is made to the fact the the expense paid or revenue received is for the current period or for pre or post period.
In accrual basis of accounting, the Income & Expense account or Profit/Loss Account are made on the basis of epense or income of the current period irrespective of the fact that cash has been fully paid or not and irrespective of the fact that revenue amount has been fully received or not.
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