BUSI 1004 Lecture Notes - Lecture 3: Deferral, Accrual, Financial Statement
4 Nov 2018
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Prepayments: cash is paid or received before the actual accounting event, expenses: prepaid expenses (dr: asset/cr: cash) the expense hasn"t been accrued yet, revenues: unearned revenues (dr cash/cr: liabilities) cr liabilities because we haven"t earned anything yet. Accruals: event has occurred, but the cash has not yet been paid or received, expenses: accrued expense (dr: expense or asset/cr: a/p, revenues: accrued revenues (dr: receivable/cr: revenues) Adjusting entries-prepaid expenses: costs are initially recorded as assets and allocated to expenses of future periods, for example, prepaid rent and insurance, office supplies, plant and equipment. Ex: you start they year with ,500 of office supplies. During the year you purchase ,000 of supplies. At the end of the year, the inventory count reveals that there are ,700 (ending balance) of supplies on hand. Transaction: you purchase equipment at a cost of ,000 at the beginning of the year. You are now at the end of the year and need to record depreciation.
