ACCT 200 Lecture 6 Outline of Last Lecture I Problem E2 6 II Problem E2 7 III Problem E 2 17 IV Problem E2 19 V Problem E2 20 Outline of Current Lecture I Reminders II Accrued Revenue III Deferred Revenue IV Accrued Expense V Deferred Expense Current Lecture Note For the categories titled Accrued Revenue Accrued Expense Deferred Revenue and Deferred Expense the answers to the examples show what would happen to the account that specific transaction is affecting B S Balance Sheet I S Income Statement RE Retained Earnings statement I Reminders a Revenue earned recorded in period it was earned receipt of cash is irrelevant to when revenue is recorded b Expenses assets that are used up recognized when incurred payment of cash is irrelevant to having an expense recorded c Matching i Match revenues with associated expenses ii When revenue is earned increase an account These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute II Accrued Revenue also known as Accounts Receivable a Step 1 Earn the revenue b Step 2 Collect the cash c Example On February 1 2014 Best Buy sold a 2000 TV on account to a customer Best Buy collected the 2000 in cash on April 17 2014 2 1 14 Increase sales revenue 2000 equity acct RE increase accounts receivable 2000 asset This is balanced 4 17 14 increase cash 2000 asset decrease account receivable 2000 asset This does not show up on income statement since it was used on the income statement in February This shows that revenue is recorded when earned not necessarily when cash is received III Deferred Revenue a Step 1 Receive Cash b Step 2 Earn and recognize revenue c Example On January 1 2014 The Commons Apartment Complex collected 24000 in cash for 1 years rent 1 1 14 increase cash 24000 asset operating cash flow increase unearned revenue 24000 liability 1 31 14 increase earned revenue 2000 I S RE decrease unearned revenue 2000 On 2 1 14 how much is left in the unearned revenue account 22000 IV Accrued Expenses a Step 1 Incur expense b Step 2 Pay cash c Example Grace works for Dr Seepatients for the month of March 2014 Her monthly salary is 5000 and March 31st falls on a Wednesday but payday isn t until Friday April 2nd 3 31 14 increase wage expense 5000 I S RE increase wage payable 5000 liability 4 2 14 decrease cash 5000 asset decrease wages payable 5000 liability V Deferred Expense also known as prepaid expenses assets a Step 1 Cash is paid b Step 2 Incur expense when something has been used up c Example On January 1 2014 The Nashville Sounds bought 20 000 worth of baseballs At the end of January the supply closet only had 5 000 worth of baseballs in it 1 1 14 increase supplies 20 000 assets decrease cash 20 000 assets 1 31 14 increase supplies expense 15 000 decrease supplies 15 000
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