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In accounting, adjusting entries are journal entries usually made at the end of an accounting period to allocate income and expenditure to the period in which they actually occurred. The revenue recognition principle is the basis of making adjusting entries that pertain to unearned and accrued revenues under accrual-basis accounting .
This would result in a fictitious profit in the sale period and a fictitious loss in the payment period, both equal to the cost of goods sold. Period costs , such as office salaries or selling expenses, are immediately recognized as expenses and offset against revenues of the accounting period .
In tax accounting, adjusted basis is the net cost of an asset after adjusting for various tax-related items. [1] Adjusted Basis or Adjusted Tax Basis refers to the original cost or other basis of property, reduced by depreciation deductions and increased by capital expenditures. Example: Muhammad buys a lot for $100,000. He then erects a retail ...
The capital gain on this transaction is how much you sold it for minus the cost basis: $1,500 – $1,000 = $500. This $500 gain is subject to capital gains tax. Factors that impact an investment ...
The cost basis of an asset is important to you for two primary reasons – tax planning and investment planning. These two reasons are related because only with the proper investment planning can ...
IAS 10 requires an entity to adjust the amounts recognised in its financial statements to reflect adjusting events after the reporting period. [7] For instance, the settlement after the reporting period of a court case that confirms that the entity had a present obligation at the end of the reporting period. [8]
A statutory basis of accounting (for example, a basis of accounting that insurance companies use under the rules of a state insurance commission). Income-tax-basis financial statements. Cash-basis and modified-cash-basis financial statements. Financial statements prepared using definitive criteria having substantial support in accounting ...
Depreciation and Cost of Goods Sold are good examples of application of this principle. Full disclosure principle: Amount and kinds of information disclosed should be decided based on trade-off analysis as a larger amount of information costs more to prepare and use. Information disclosed should be enough to make a judgment while keeping costs ...