ACC561 UOPX Revenue Recognition & Expense Recognition Response

Business Finance

Under the accrual basis accounting, revenues and expenses are recognized by the following principles:

  • Revenue recognition: Revenue is recognized when both of the following conditions are met: Revenue is earned and Revenue is realized or realizable.
  • Expense recognition: Expense is recognized in the period in which related revenue is recognized (this is also known as the Matching Principle).

Respond to one or more of the following in a minimum of 175 words:

  • Discuss when the requirements of the revenue recognition principle and the expense recognition principle are usually met. Give an example.
  • What is the purpose of a trial balance? If the debits equal the credits in the trial balance, will the financial statements be error-free? Why or why not?
  • What are the differences in the cash basis and the accrual basis of accounting? Which is required by GAAP? Why?
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