PowerPoint - Ch.3

Expense e prepaid expense a 3 33 xxx xxx the matching

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Unformatted text preview: s goods/services were delivered. When the expense is incurred PREPAID EXPENSE is reduced and an EXPENSE is recorded. Cash is paid before expense is incurred ­ $ Paid Expense Incurred Prepaid expense (+A) xxx Cash (­A) xxx Expense will be recorded when incurred. Expense (+E) Prepaid expense (-A) 3-33 xxx xxx The Matching Principle – the most simple example of an expense transaction. When cash is paid on the date the expense is incurred, the following entry is made: Expense Incurred AND Cash Paid Expense (+E) xxx Cash (­A) xxx 3-34 The Matching Principle – not so simple. If cash is paid after the company receives goods or services, a liability PAYABLE is recorded. Cash paid after expense is incurred ­ Expense Incurred Expense (+E) xxx Payable (+L) xxx 3-35 The Matching Principle When cash is paid the PAYABLE is reduced. Cash paid after expense is incurred ­ Expense Incurred Cash Paid Expense (+E) xxx Payable (+L) xxx Cash will be paid. Payable (­L) xxx Cash (­A) xxx 3-36 The Matching Principle Typical assets and their related expense accounts include. . . CASH PAID FOR as used over time becomes EXPENSE Supplies inventory Supplies expense Prepaid insurance Insu...
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