Recording of Business Transactions (Business & Marketing Coursework)

Recording a Business Transaction
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Recording a Business Transaction
The recording of vacation pay should be done when the vacation privilege is earned, rather than recording when the vacation is taken. The reasons discussed ahead elaborate on the statement that vacation pay must be recorded when it is received (Warren, 2020). The accrual principle of accounting states that all revenues or expenses must be recorded as they occur instead upon receiving or sending the payment (Survey of Accounting, 2016). Since the vacation pay is an expense, it must be recorded during the period it is earned. However, some companies adopt a cash basis of accounting, where transactions are recorded when the payment is received (Franklin, 2019). However, a cash basis accounting method fails to record the revenues of sales if the payment is to be debited later i...