What does contractual basis mean on the CPA exam?
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.
Defined against AU-C 800.07.
Which CPA exam sections use contractual basis?
Contractual basis appears in the FAR section of the CPA exam.
Other terms defined against AU-C 800
- cash basis: Recognizing revenue when cash is received and expense when cash is paid.
- regulatory basis: A special-purpose framework required by a regulator, such as an insurance department's rules.
Related terms
- applicable financial reporting framework: The framework management adopts for the statements, such as GAAP or a special purpose framework.
- adjusted basis: What the taxpayer has invested in property for tax purposes: cost, plus improvements, less depreciation taken.
- stock basis: A shareholder's investment in S corporation stock for tax purposes.
- tax basis: What an asset or liability is worth for tax purposes, which is often not what it is worth for accounting.
- 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.
- carryover basis: Basis that follows the property from the previous owner instead of resetting to what was paid.