Objectives: Chapter Three
The following learning objectives for this chapter map to the curriculum design for our online university-level courses. These courses are offered through Utah State University, and result in the awarding of up to 6 hours of highly transferrable college credit. To learn more, check out the classroom link.
"Measurement triggering" transactions and events.
Distinguish between the economic and accounting concepts of income.
Why do accountants use the transactions approach to compute net income?
Distinguish between exchange transactions and nonexchange events.
The periodicity assumption and its accounting implications.
Define the periodicity assumption, and know its importance in income measurement.
What is a fiscal year versus a calendar year?
Basic elements of revenue recognition.
Know the meaning of the word "recognize."
Be able to recite the basic conditions precedent to revenue recognition.
Have a basic awareness of extended SEC guidelines for revenue recognition.
Basic elements of expense recognition.
What are the three general rules, with examples of each, for expense recognition?
Understand the importance of the matching principle to expense recognition and income measurement.
Distinguish between payment and recognition.
The adjusting process and related entries.
Why are adjusting entries needed?
Understand and be able to prepare adjusting entries for multiperiod costs and revenues and accrued revenues and expenses.
Know when adjustments are needed.
Define the term "accrual."
Distinguish between a trial balance and an adjusted trial balance.
Be able to deal with the alternative treatment of prepaid expenses and unearned revenues.
Why might the alternative treatment of adjustments "simplify" the accounting process?
Accrual versus cash-basis accounting.
Define and apply both the accrual basis and cash basis of accounting.
Which method of accounting (cash or accrual) is generally preferred, and why?
What is the nature of the modified cash-basis system?