ADMN 1021H Lecture Notes - Lecture 4: Deferral, Accrual, Financial Statement

• School: Trent University
• Department: Business Administration
• Course: ADMN 1021H
• Professor: Morales Jaime

Document Summary

Atleast one account related to income statement and one account related to the balance sheet (financial statement) Revenue recognition: revenue is earned (recognized) when: Sales or performance effort is substantially complete. Collection is reasonably assured (100% sure money received) Due to ordinary activity, a decrease in future economic benefits occurs. Expenses paid in cash and recorded as assets before they are used (prepaid rent, prepaid insurance, supplies etc) Unearned revenues: a) cash received and recorded as liabilities before revenue is earned (gift cards, pre-orders, purchase in advance: adjusting entry decreases the liability (unearned revenue) account and increases a revenue account. Expenses paid in cash and recorded as assets before they are used. Adjusting entry increases an expense account and decreases the asset (prepaid) account. Accruals: accruals have not been recognized at all until an adjustment is made, revenues that have been earned, but not received in cash (accrued revenues)