chapter 3 Summary of Adjusting Entry Relationships PG20

chapter 3 Summary of Adjusting Entry Relationships PG20 -...

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CHAPTER 3 REVIEWING THE ACCOUNTING PROCESS IllUSTRATION 3-3 (Continued) 3. Expenses are often incurred before they are paid. An expense incurred but not yet paid is called an accrued expense. If at the end of an accounting period this accrued expense has not been recorded (which is often the case because it usually has not been billed yet by the vendor), it must be recorded by way of an adjusting entry. Expense that accrues with the passage of time (such as interest expense) is a good example of a reason to need an accrued expense (or accrued liability) type adjusting entry. 4. Revenues are often earned before they are collected. A revenue earned but not received is called an accrued revenue. If at the end of an accounting period this accrued revenue has not been recorded (which is often the case because it usually has not been billed yet), it must be recorded by way of an adjusting entry. Revenue that accrues with the passage of time (such as interest revenue) is a good example of a reason to need an
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This note was uploaded on 12/03/2009 for the course ACG 3131 taught by Professor Rotella during the Spring '08 term at University of Central Florida.

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