Cashreceivedafterrevenueisearned company delivers

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Unformatted text preview: er the company delivers goods or services, an asset ACCOUNTS RECEIVABLE is recorded. Cash received after revenue is earned ­ Company Delivers Accounts receivable (+A) xxx Revenue (+R) xxx 15 Revenue Principle When the cash is received the ACCOUNTS RECEIVABLE is reduced. Cash received after revenue is earned ­ Company Delivers Cash Received Accounts receivable (+A) xxx Revenue (+R) xxx Cash will be collected. Cash (+A) Accounts receivable (-A) 16 xxx xxx Revenue Principle Assets reflecting revenues earned but not yet received in cash include . . . CASH TO BE COLLECTED (Owed by customers) and already e arned as REVENUE (Earned when goods or services provided) Interest receivable Interest revenue Rent receivable Rent revenue Royalties receivable Royalty revenue 17 The Matching Principle Resources consumed to earn revenues in an accounting period should be recorded in that period, regardless of when cash is paid. 18 The Matching Principle If cash is paid before the company receives goods or services, an asset account, PREPAID EXPENSE is recorded. Cash is paid before expense is incurred ­ $ Paid Prepaid expense (+A) xxx Cash (­A) xxx 19 The Matching Principle 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. 20 Expense (+E) Prepaid expense (-A) xxx xxx The Matching Principle When cash is paid on the date the expense is incurred...
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