ACCT-2001-SEPT.-7--11

ACCT-2001-SEPT.-7--11 - Principle) NOW. Why? Because...

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ACCT. 2001 SEPT. 7- 11 *MISSED CLASS on SEPT. 9 MUST GET NOTES ON CH. 3 IMPORTANT!!! Ch. 3 Review of Sept. 9 given on Sept. 11: Deferrals- defer Cash Advance -postpone recording of an Expense (paid cash advance) or Revenue (record cash advance) ^ Marketing Principle ^ Revenue Principle Example: Magazine Subscriptions $120,000 beginning in January Subscription is for year>>>1 magazine per month Cash $120,000 Unearned Revenue $120,000 What the Revenue Principle is telling us is that every time we mail out a magazine we are earning out revenue. We can book a revenue when we earn it- NOT before. Do NOT let cash manipulate income statement. Revenue Earned: Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Dec. 10,000 10K 10K 10K 10K 10K 10K 10K 10K 10K 10K 10K Adjusting Entry: 1/31 Unearned Revenue 10,000 2/28 Subscription Magazine Revenue 10,000 3/31 Sept. 11 Accruals- (opposite of deferrals) Receive cash later or pay cash later. A cash journal entry comes later but will record a journal entry for an expense (Matching Principle) and/or revenue (Revenue
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Unformatted text preview: Principle) NOW. Why? Because Matching Principle says so and Revenue Principle. Accrue Expense: Pay workers $10,000 every two weeks. Dec. 2008 Jan. 2009 1 week 1 week 5,000 5,000 Expense Expense Dec. 31-Pay Cash $10,000 Adjusting Entry: (Adjusting Entry) Dec. 31 Salary Expense $5,000 Salary Payable $5,000 Pay Day: (Journal Entry) Jan. 7 Salary Expense $5,000 Salary Payable $5,000 Cash $10,000 *Balance sheet will be affected by adjusting entry Accrue Revenue: Adjusting Entry/ Journal Entry Accounts Receivable $ Service Revenue $ *As soon as done work, make sure revenue goes in the time period it took place! List of Adjustments 1. Deferrals 2. Accruals 3. Depreciation 4. Other Example: Bought office supplies. Office Supplies $1,000 Cash $1000 Office Supplies at the end of the month: $300 Supplies 1000 700--------------300 AE: Supplies Expense $700 Expense $700...
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ACCT-2001-SEPT.-7--11 - Principle) NOW. Why? Because...

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