COMMERCE 1AA3 Lecture Notes - Lecture 6: Accounts Receivable, Current Asset, Net Income
19 Sep 2016
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Conditions to identify an item as revenue: service performed, goods transferred, amount is known, risk and reward transferred, amount is reasonable. Matching principle- expense recognized in period when it was incurred, regardless of when it was paid. It is a liability, because a service/good is owed, it has not been earned yet. It is an asset because it will provide a future benefit. Deferral means services will be done later, so it is a liability. When payment has been received but service not provided, for the receiver, it is a liability and the account name is unearned revenue ( e. g unearned rent revenue or unearned insurance revenue. ) For the receiver , we call it deferred revenue or simply deferral. For the payer it is an asset called prepaid expense or simply repayments. On the other hand , if service provided but cash not received:
