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Unformatted text preview: Dont need cash to have revenue At end of the month you ask: Have I recorded all my revenue? Accruals happen when recognition precedes cash flow Accrual always has a receivable or payable involved Not every company reverses, but we always reverse accruals Recognition comes first in an accrual Deferral Putting off recognition, until weve earned the revenue or incurred the expense Prepaid insurance o Date: 9/1 o Dr prepaid insurance 1200 o Cr Cash 1200 o insurance is consumed by the passing of time o Date 12/31 o Cr Prepaid insurance 400 o dr insurance expense 400 o Another way to do it: o Date: 9/1 o Dr insurance exp 1200 o Cr Cash 1200 o adjustment o date 12/31 o dr prepaid insurance 800 o cr insurance expense 800 to do adjusting journal entries you have to: where you currently are Where you should be...
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- Spring '08