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19 Cards in this Set
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Is recording useful information, usually focused for a specific purpose. |
Record-keeping |
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Determine the purpose of the record. Choose an appropriate method or plan for recording the information . Select information to include. Enter information for accounting and any explanations. Use the information to make a determination, decision or judgement |
Process of record-keeping |
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Involves the recording, on a regular basis, of a company's financial transactions. |
Bookkeeping |
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Are individuals who manage all financial data for companies. |
Bookkeepers |
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Proper bookkeeping gives companies a reliable measure of their performance. It also provides information to make general strategic decisions and benchmark for its revenue and income goals. |
Importance of Bookkeeping |
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Record transaction when it occurs, even if cash is not received or paid. |
Accrual Basis of Accounting |
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Record transaction only when cash is actually received or paid. |
Cash basis of Accounting |
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Is a monetary activity that is recorded as an entry in accounting records and has monetary affect on the financial statements. |
Transaction |
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A transaction among buyers and sellers is a quite simple transaction. In exchange for a product or service, a buyer pays the seller. |
Transactions Insights |
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The rules and procedures that a business uses to record its revenues and expenses |
Accounting methods |
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GAAP |
Generally accepted accounting principles |
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AR |
Accounts Receivable |
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Is used by the majority of smaller businesses, especially sole proprietors. |
Cash Accounting technique |
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Economic events are acknowledged by matching earnings to expenditures at the moment the transaction is made instead of when payment has been made or received. |
The work of Accrual Accounting Method |
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Is generally used by small firms since this is simpler, and it gives a clear view of how much money the company has available. |
The work of Cash accounting method |
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advantages of accrual basis accounting |
●it allows for more in depth business analysis ●It helps businesses in financial planning ●This accounting method complies with GAAP |
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limitations of accrual basis accounting? |
●It creates several drawbacks ●It results in deception ●In this method of accounting, moving cost becomes difficult |
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Advantages of Cash basis accounting |
●For small enterprises, Cash-based accounting offers plenty of advantages over accrual or modified Cash basis accounting ● It is easy to use and maintain ●It allows you to quickly calculate how much Cash you have on hand ●potential tax advantages |
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Limitations of Cash basis Accounting |
●It has several drawbacks ●shows a limited picture of your income and expenses ●not all businesses are allowed to use this accounting method ●difficult to switch over to other accounting methods |
