COMMERCE 1AA3 Lecture Notes - Lecture 5: Accrual, Deferral
12 Oct 2017
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Document Summary
Unearned revenues from transactions where a rm receives cash in advance to provide services in the future. It is a liability until the rm ful ls its obligations by earning the revenue, in which case the following journal entry is prepared. Prepaid expenses results from transactions where a rm pays cash in advance to receive services in the future. It is a asset until the rm receives those services, in which case the following journal entry is prepared: Adjustments are end-of-year journal entries to update account balances. Going-concern and periodicity dictate that nancial statements be prepared periodically. On november 1st, a company receives ,000 to provide maintenance services to a client for three months e ective immediately. The company prepares its annual nancial statement on december 31st: as of november 1, there is no revenue earned. +30,000: as of december 31st, the company would have provided maintenance services for two months.
