Where There Is an Existing Contract Between Two Parties and One

question 20

True/False

Where there is an existing contract between two parties and one party,to ensure performance by the other,promises something more,so long as the other party also gives something more,there is a binding contract and the first party must perform the new promise.

Understand the necessity of periodic financial statements and the adjustments required for their preparation.

Grasp the concept of prepayments and their treatment in financial reporting.

Appreciate the rationale behind choosing a fiscal year and its impact on financial reporting.

Interpret the significance of adjusted trial balances in the accounting cycle.

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Definitions:

Net Cash

Describes the amount of cash remaining after all cash expenditures, or disbursements, are subtracted from the cash receipts during a given period.

Indirect Method

A method used in accounting to calculate cash flows from operating activities, adjusting net income by changes in non-cash accounts.

Direct Method

A technique used in cash flow statements to present cash activities directly related to operating activities.

Investing Adjustments

Adjustments made in the accounting records related to investments in securities or fixed assets to reflect their fair values as of the financial statement date.