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17 Cards in this Set

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  • Back
Accrual accounting is a function of _____
time
Accrual Accounting
--> transaction is recorded in the period the transaction occurred, regardless of whether or not cash has changed hands
- Recording the transactions in the period they occur, regardless of whether cash has been received or paid
- focus on legal rights and obligations, as well as the matching, conservation and revenue recognition conventions
What are annual reports for any NZ business prepared using?
Accrual Accounting
Who usually uses accrual accounting?
medium to large businesses
Cash accounting is a function of _____
cash
Cash Accouting
--> transaction is recorded when cash changes hands, regardless of the period the transaction occurred
- Only transactions involving cash are recorded
Who usually uses cash accounting?
small businesses
What happens once you change from cash to accrual accounting?
You can't go back
What does accrual accounting focus on?
Relevance - it is relevant to know how much profit has been earnt
What does cash accounting focus on?
Reliability - this is reliable information as you actually have the cash/have paid cash
What type of transactions does accrual accounting use?
Both credit and cash transactions
What type of transactions does cash accounting use?
Cash transaction
Which financial statements does accrual accounting use?
All four
Which financial statements does cash accounting use?
Only cash flow statement
What happens at the end of the operating recycle, using cash or accrual accounting?
Same result
During the operating cycle... Accrual
Accrual method reflects a conservative/matched measure of historical legal transactions
During the operating cycle... Cash
Cash method reflects historical cash transactions