31 - Supplies Example • Suppose a company purchased...

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Deferrals Cash has already been received or paid Related expense or revenue has not yet been recorded Prepaid expenses Company has paid for expense in advance Adjustment needed to record amount used Unearned revenues Customer pays in advance for good or service Adjustment needed to record amount of revenue earned Prepaid Expenses Expenses paid in advance Include prepaid rent and supplies Asset is recorded when purchased Adjustment needed to record amount used Prepaid Rent Example Now, it’s December 31, the company’s year-end The amount of rent that has expired must be recorded This amount is recorded as rent expense Prepaid rent (asset) needs to be reduced so it reflects the amount of rent remaining
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Unformatted text preview: Supplies Example • Suppose a company purchased $3,200 of supplies during the year The asset “supplies” was debited for each purchase • At the end of the year, a physical count reveals $500 of supplies on hand Depreciation of Plant Assets • Allocation of plant assets cost over their useful lives • Results in a debit to an expense Depreciation Expense • Corresponding credit Accumulated Depreciation Accumulated Depreciation • Account that shows the sum of depreciation expense of the plant asset • Contra-asset Always has a companion account Normal credit balance...
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This note was uploaded on 06/14/2011 for the course ACCOUNTING 23020 taught by Professor Na during the Spring '11 term at Kent State.

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