What does basis of accounting mean on the CPA exam?
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Basis of accounting. The rule for WHEN something is recorded: cash when money moves, accrual when it is earned or incurred, modified accrual somewhere between.
Related terms
- modified accrual: The basis for governmental fund statements: revenue when measurable and available, expenditure when the liability is incurred.
- cash basis: Recognizing revenue when cash is received and expense when cash is paid.
- tax basis: What an asset or liability is worth for tax purposes, which is often not what it is worth for accounting.
- adjusted basis: What the taxpayer has invested in property for tax purposes: cost, plus improvements, less depreciation taken.
- carryover basis: Basis that follows the property from the previous owner instead of resetting to what was paid.
- contractual basis: A special-purpose framework built from the terms of a contract, used when two parties agree how the numbers will be prepared for their own purposes.