Concept explainers
(a)
Accrual basis of accounting:
In accrual Basis of accounting, the company records all the transaction that brings changes in the financial statement of the company. In accrual basis of accounting, the revenue is recognized for the accounting period, in which the goods are sold, or the service performed even if cash is not exchanged. Similarly the expenses are recognized for the accounting period, in which the business incurred expenses even if cash is not exchanged.
To identify: The accounts of Company C, which provide evidence that Company C uses accrual accounting.
The income statement account of Company C, which would be affected by the adjustments process.
(b)
To identify: The accounts of Company VF, which provide evidence that Company VF uses accrual accounting.
The accounts of Company VF, which provide evidence that Company VF uses accrual accounting.
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Financial Accounting: Tools for Business Decision Making, 8th Edition
- Businesses using the allowance method for the recognition of uncollectible accounts expense commonly experience four accounting events: a. Recognition of uncollectible accounts expense through a year-end adjusting entry. b. Write-off of uncollectible accounts. c. Recognition of revenue on account. d. Collection of cash from accounts receivable. Required Show the effect of each event on the elements of the financial statements, using a horizontal statements model like the one shown here. Use the following coding scheme to record your answers: increase is +, decrease is –, leave the cell blank for not affected. In the cash flow column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). The first transaction is entered as an example. Effect of Events on the Financial Statements Balance Sheet Income Statement Stockholders' Net Event Assets Liabilities Revenue Expense Cash Flow Equity Income 1. %3D + 2. 3. 4. +arrow_forwardThe financial statements of Chehade Services included the following accounts. a Under the column Financial Statement, choose from the list of codes below, the appropriate financial statement where the accounts listed would appear. Code Income Statement US Balance Sheet B/S Statement of Owner's Equity OE Financial Statement b For the column Balance Sheet Classification, choose the appropriate balance sheet classification from the list of codes below. If the account does not belong on the balance sheet, use the code na Balance Sheet Classification Code Current Assets Long-term Investments Property. Plant, and Equipment Intangibles Goodwill Current Liabilities Non-Current Liabilities Owner's Equity Not on the Balance Sheet 35-odgga PPE NCL NCLarrow_forwardListed below are eight technical accounting terms introduced in this chapter:Realization principle CreditTime period principle Accounting periodMatching principle ExpensesNet income Accounting cycleEach of the following statements may (or may not) describe one of these technical terms. Foreach statement, indicate the term described, or answer “None” if the statement does not correctlydescribe any of the terms.a. The span of time covered by an income statement.b. The sequence of accounting procedures used to record, classify, and summarize accountinginformation.c. The traditional accounting practice of resolving uncertainty by choosing the solution thatleads to the lowest amount of income being recognized.d. An increase in owners’ equity resulting from profitable operations.e. The underlying accounting principle that determines when revenue should be recorded in theaccounting records.f. The type of entry used to decrease an asset or increase a liability or owners’ equity account.g. The…arrow_forward
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