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SS2: FINANCIAL ACCOUNTING - 2ND TERM

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These are the totality of methods adopted by an enterprise for applying fundamental accounting concepts to financial transactions in order to determine the following:

(i) The period in which revenue and costs are recognized in the profit and loss.

(ii) The amount at which materials will be stated in the balance sheet.

There are two basis:

(i) Accrual basis: Under this basis, revenue and expenses are recognized in the accounting period to which they relate not when they are received or paid.

(ii) Cash basis: Under this basis, only revenue actually received and expenses paid during the accounting period are recognized.

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