ACCT 200 Lecture 7 Outline of Last Lecture I Reminders II Accrued Revenue III Deferred Revenue IV Accrued Expense V Deferred Expense Outline of Current Lecture I Adjustments II Depreciation III Classification IV Current Ratio V Quick Ratio Current Lecture I II End of Period Adjustments these are needed to match revenue with expense due to the things we talked about last class These are a Revenue can be earned before cash is received accrued rev b Revenue can be earned after cash is received deferred rev c Expense can be incurred before cash is paid accrued exp d Expense can be incurred after cash is paid deferred exp Depreciation this is the expensing of a fixed asset land is the exception a This is either caused by physical wear and tear of the asset or by functional depreciation b This is not the decline in market value of the asset c This does not involve a cash transaction 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 III IV V d To keep up with depreciation you will have a Depreciation Expense account and an Accumulated Depreciation account e Example You buy a computer for your company in January 2010 for 1000 That computer is going to last for 5 years of use Although you have already paid the 1000 cash for it when you divide it up it is like paying 200 a year for 5 years At the end of 2010 you have used up one year of your asset this goes in the Depreciation Expense 2010 Depreciation Expense 200 2010 Accumulated Depreciation 200 At the end of 2011 you have used up another year of the computer s functionality so you used up 200 worth of your asset that year However overall you have now used up 2 years or 400 of your asset This is the Accumulated Depreciation 2011 Depreciation Expense 200 2011 Accumulated Depreciation 400 Classification a Current Assets assets that will generate revenue within one year b Long term assets assets that will help generate revenue over a period longer than one year c Current liabilities debts that will be satisfied within one year d Long term liabilities debt that will be satisfied over a period longer than one year e Equity owners claims on assets Current ratio a Current ratio Current Assets Current Liabilities Quick Ratio a Quick Ratio Quick Assets Current Liabilities b Quick assets consist of cash temporary investments and receivables c This basically measures the immediate debt paying ability of the company A high quick ratio shows that a company is more prepared to pay off debts
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