Review for AC202

An asset to expense over its useful life matching

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Unformatted text preview: accounting period are recorded as iabilities GENERAL JOURNAL Date Jan. Account Titles and Explanation 1 Cash Unearned Rental Revenue P R Debit Credit 6,000 6,000 Collected $6,000 in advance for rent. 146 Unearned Revenue Over time, the revenue is recognized as it is Over time, the revenue is recognized as it is earned.. earned GENERAL JOURNAL Date Account Titles and Explanation P R Debit Credit Monthly Adjusting Entry for Rent Revenue Jan. 31 Unearned Rental Revenue Rental Revenue Rental revenue for January. 500 500 147 Converting Liabilities to Revenue Balance Sheet Balance Sheet Income Statement Income Statement Liability for Liability for ffuture periods. uture periods. Revenue earned Revenue earned tthis period. his period. Unearned Rental Revenue 1/31 500 1/1 6,000 Bal. 5,500 Rental Revenue 1/31 500 148 Accruals •Revenue has been earned, but not collected. •Expenses have been incurred, but not yet paid. 149 Accrued Revenues Revenues earned but not yet received in cash or recorded at the statement date. 150 Accruing Uncollected Revenue Examples Include: Interest Earned on Savings Account Work Completed But Not Yet Billed to Customer 151 Accrued Revenues Earned $200 for advertising services to clients in October, but they were not billed until after October 31st. Accounts Receivable Oct 31 200 GENERAL JOURNAL Oct 31 Accounts Receivable Service Revenue Service Revenue Oct 31 Debit 200 Credit 200 200 Accrued Expenses Expenses incurred but not yet paid or recorded at the statement date. 153 Accruing Unpaid Expenses Examples Include: Hey, when do we get paid? Interest on a loan Wages and Salaries Property Taxes 154 Accrued Interest Interest Expense Oct 31 50 Interest Payable Oct 31 GENERAL JOURNAL Oct 31 Interest Expense Interest Payable Accrue interest expense for the month Debit 50 Credit 50 50 Accrued Salaries - Salaries Paid for after the Service Has Been Performed. Accrued Salaries Salaries Expense Oct 31 1,200 Salaries Payable Oct 31 1,200 GENERAL JOURNAL Debit Oct 31 Salaries Expense 1,200 Salaries Payable Accrue salary expense for the month Credit 1,200 Accrual Basis vs. Cash Basis Accrual Basis Cash Basis Revenues are recognized when earned and expenses are recognized when incurred. Revenues are recognized when cash is received and expenses recorded when cash is paid. Not GAAP Accounting 158 Adjusting Accounts An adjusting entry is recorded to bring an asset or liability account balance to its proper amount. Framework for Adjustments Adjustment s PREPAIDS Paid (or received) cash before expense (or Paid (or received) cash before expense (or rrevenue) recognized evenue) recognized Prepaid (Deferred) Prepaid (Deferred) expenses* expenses* Unearned (Deferred) Unearned (Deferred) rrevenues evenues *including depreciation ACCRUALS Paid (or received) cash after expense (or revenue) Paid (or received) cash after expense (or revenue) rrecognized ecognized Accrued Accrued expense expense Accrued Accrued revenues revenues 159 Prepaid Insurance On Dec...
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