Lecture06_Spring_2009_v2

Lecture06_Spring_2009_v2 - Lecture 6 Spring 2009 Accounting...

Info iconThis preview shows pages 1–8. Sign up to view the full content.

View Full Document Right Arrow Icon
1 Lecture 6 Spring 2009 Accounting Cycle and the Adjusting Entries
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
2 Goals of Today’s Class Continue discussion of accounting cycle Continue discussion of adjusting entries Examples
Background image of page 2
3 Adjusting Entries There are two types of adjusting entries. ACCRUALS ACCRUALS Revenues earned or expenses incurred that have not been previously recorded. Revenues earned or expenses incurred that have not been previously recorded. DEFERRALS DEFERRALS Receipts of assets or payments of cash in advance of revenue or expense recognition. Receipts of assets or payments of cash in advance of revenue or expense recognition.
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
4 Accruals and Deferrals Accrual Deferral Revenue Recognized / Expense Incurred Yes No Cash Received / Cash Paid No Yes
Background image of page 4
5 End of accounting period. Cash received or paid. Revenues earned or expense incurred Examples include rent received in advance (an Examples include rent received in advance (an unearned revenue) or insurance paid in unearned revenue) or insurance paid in advance (a prepaid expense). advance (a prepaid expense). Examples include rent received in advance (an Examples include rent received in advance (an unearned revenue) or insurance paid in unearned revenue) or insurance paid in advance (a prepaid expense). advance (a prepaid expense). Deferrals
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
6 Prepaid Expense - Example 1 On January 1, 2003, Tipton, Inc. paid $3,600 for a 3-year fire insurance policy. They are paying in advance for a resource they will use over a 3-year period. The entry on January 1, 2003, to record the policy on Tipton’s books would appear as follows . . . On January 1, 2003, Tipton, Inc. paid $3,600 for a 3-year fire insurance policy. They are paying in advance for a resource they will use over a 3-year period. The entry on January 1, 2003, to record the policy on Tipton’s books would appear as follows . . . This is an ASSET ASSET account This is an ASSET ASSET account
Background image of page 6
Prepaid Expense - Example 1 At the end of 2003, we determine how much At the end of 2003, we determine how much of the “prepaid expense” has been used up of the “prepaid expense” has been used up during the period. during the period. Since the policy is for Since the policy is for 3 years 3 years , we can , we can assume that 1/3 of the policy will expire assume that 1/3 of the policy will expire each year. each year. At the end of 2003, we determine how much At the end of 2003, we determine how much of the “prepaid expense” has been used up of the “prepaid expense” has been used up during the period. during the period. Since the policy is for Since the policy is for 3 years 3 years , we can , we can assume that 1/3 of the policy will expire assume that 1/3 of the policy will expire each year. each year.
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 8
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 46

Lecture06_Spring_2009_v2 - Lecture 6 Spring 2009 Accounting...

This preview shows document pages 1 - 8. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online