Basic Rules of an Accounting System The Matching Principle: Accruals and Deferrals.
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Transcript of Basic Rules of an Accounting System The Matching Principle: Accruals and Deferrals.
Basic Rules of an Accounting System
The Matching Principle:
Accruals and Deferrals
Basic Rules of an Accounting System
• A transaction is an economic event that can affect one, two or more items in the financial statements.
Rules determine:
WHATtransactions
are to be recorded
WHENtransactions
are to be recorded
HOWtransactions
are to be recorded
AMOUNTof the
transaction to be
recorded
Framework of an Accounting System
Assets = Liabilities + EquityAssets = Liabilities + Equity
The Accounting EquationThe Accounting Equation
• By expanding the accounting equation, transactions can be analyzed, summarized, and recorded within the integrated financial statement framework.
Integrated Financial Statement Framework: Template