ACCT 200 Lecture 6 Outline of Last Lecture I. Problem E2-6II. Problem E2-7III. Problem E 2-17IV. Problem E2-19V. Problem E2-20Outline of Current Lecture I. RemindersII. Accrued RevenueIII. Deferred RevenueIV. Accrued ExpenseV. Deferred ExpenseCurrent 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. Remindersa. 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. Matchingi. Match revenues with associated expensesii. When revenue is earned, increase an accountThese 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 revenueb. Step 2. Collect the cashc. 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 balanced4/17/14 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 Cashb. Step 2. Earn and recognize revenuec. Example: On January 1, 2014 The Commons Apartment Complex collected $24000 incash 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?$22000IV. Accrued Expensesa. Step 1. Incur expenseb. Step 2. Pay cashc. 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 upc. 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
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