Hy

I was goin thru becker passmaster for second chap the thhird time..but cant get these two qn's related to the timing issues

CPA-00557(just cant understand their xplaination){ can someone explain me the cash v/s accrual basis of accounting in detail with an ex:}

CPA-00578(?????)

CPA-00575 (y do v (+)50000 and not (-) 50000 as we have made an adv payment of 50000...so dnt v have to deduct it form A/P??)

thanks guys

also for the following just if someoen cud gimme a brief summary on

capitalizin/expensim/impairment loss for foll:

Research and Development costs

Software development costs

goodwill...

Start up costs

franchise agreement..franchisor/franchisee

anyother intangible assets....

just so tat it stays in my head forver..and dnt have to look at the text..guess discussin really helpd for me rather than lookin at the textual matter....

thanks

for questions concerning the difference between accrual and cash basis of accounting, I would recommend using T-accounts and adding hypothetical numbers based upon the information in the question. As an example, for accounts receivable, debits to AR represent accrual basis earnings. Credits to AR reperesent cash basis earnings. Depending on the information in the question, if debts to AR are greater than credits to AR (or vice versa), the cash basis of accounitng income could be higher than the accrual basis (or vice versa). Those accrual vs. cash basis accounting questions tend to concern the differences in net income.

For the capitiliazation/expense of intangible assets:

1. reasearch and development: expense as incurred

2. software development costs (for outside sale): expense costs incurred until techological feasibility is established. capitalize costs from when technological feasibility is established until the software is inventory and sold. Once the software is being sold to customers, apply usual inventory costing methods. **Also, amortiztion of the previously capitalized costs is the greater of % total sales or straight line.

3. software development costs (for internal use): Expense all costs incurred during preliminary project stage. Capitalize costs for enhancements, additions, and improvements after the preliminary project stage. Amortize those capitalized costs using SL method.

4. Goodwill: expense internally generated goodwill. the only goodwill that can be capitalized is goodwill generated from acquistions. Goodwill is never amortized, but tested for impairment on the reporting unit level.

5. start-up costs: expense immediately

6. franchisee fee: Unearned revenue for the franchisor. Considered revenue when franchisor substantially completes his/her duties. From the persepctive of the franchisee, this is capitalized as an intangible asset, and amortized into expense over the expected useful life of the franchise.

**Double check these explanations. I'm pretty sure they are good.

remember that cash basis is recorded as it occurs when u get cash, when u pay cash...as it occurs...

accrual method does not depend on when the cash is paid or received. it is based on when the items are incurred...

hope this helps