Limited time offer 20% OFF StudySoup Subscription details

FSU - ACG 2021 - ACG Study Guide Exam 2 - Study Guide

Created by: Carelys Trujillo Elite Notetaker

> > > > FSU - ACG 2021 - ACG Study Guide Exam 2 - Study Guide

FSU - ACG 2021 - ACG Study Guide Exam 2 - Study Guide

School: Florida State University
Department: Accounting
Course: Financial Accounting
Professor: Ronald Pierno
Term: Summer 2015
Tags:
Name: ACG Study Guide Exam 2
Description: study guide for chapter 4 and 5.
Uploaded: 02/19/2018
This preview shows pages 1 - 3 of a 8 page document. to view the rest of the content
background image Chapter 4: Accrual Accounting Concepts         Timing Issues o  Accountants divide the economic life of a business into artificial time periods Periodicity Assumption  : the economic life of a business can be divided into  artificial time periods.   Revenue Recognition Principal o Companies recognize revenue in the accounting period in which the performance  obligation is satisfied. Expense Recognition Principle o Matches expenses with revenue in the period when the company makes efforts to  generate those revenues. o When you’re concurring them, let the expenses follow the revenues. Accrual versus Cash Basis of Accounting o Cash­Basis Accounting ­ Revenues are recognized when the cash is received ­ Expenses are recognized only when cash is paid. ­ Prohibited under GAAP o Accrual­Basis Accounting  ­ Transactions recorded in the period of which the events occur ­ Revenues are recognized when services performed, even if cash was not  received ­ Expenses are recognized when incurred, even if cash was not paid.        Basics of Adjusting Entries
background image o Adjusting entries ­ ensure that the revenue recognition and expense recognition principles are  followed.  ­ includes one income statement account and one balance sheet account.  o Types of Adjusting Entries: ­ DEFERRALS:  CASH FIRST  Prepaid expenses: expenses paid in cash and recorded as assets 
before they are used or consumed.
Unearned revenues: cash received before services are performed. ­ ACCRUALS: NO CASH YET Accrued revenues: revenues for services performed but not yet 
received in cash or recorded.
Accrued expenses: expenses incurred but not yet paid in cash or 
recorded.
o Adjusting Entries for “Prepaid Expenses”: ­ Prepaid Expenses:  payment of cash that is recorded as an asset because service or 
benefit will be received in the future.
Costs that expire either with the passage of time or through use. Adjusting entry results in an increase (a debit) to an expense 
account and a decrease (a credit) to an asset account 
­ Prepayments: insurance, supplies, advertising, rent, equipment, buildings. ­ Book Value: Cost – accumulated depreciation {ISSUING A NOT IS NOT LOANING MONEY} o Adjusting Entries for “Unearned Revenues” ­ Receipt of cash recorded as a liability before services are performed
background image ­ Cash receipt before revenue is recorded. ­ Examples: rent, airline tickets, magazine subscriptions, customer deposits ­ Unearned Revenue:  Adjusting entry to record the revenue that has been earned and to 
show the correct amount of liability that remains. 
Adjusting entry results in a decrease (a debit) to a liability account 
and an increase (a credit) to a revenue account. 
o Adjusting Entries for “Accrual Revenues” ­ In the current accounting period that have not been recognized though  daily entries. ­ Revenue recorded before cash receipt ­ Examples: rent, interest (always assumed to be one year unless said so!),  services performed. ­ Purposes: 1. Shoes the receivable that exists 2. Records the revenue for services performed. ­ Increases (debits) an asset account and Increases (credits) a revenue  account.  o Adjusting Entries for “Accrual Expenses” ­ Expenses recorded before cash payment ­ Examples: rent, interest, taxes, salaries ­ Purposes: 1. Record the obligations  2. Recognizes the expenses ­ Increases (debits) an expense account and Increases (credits) a liability  account. 

This is the end of the preview. Please to view the rest of the content
Join more than 18,000+ college students at Florida State University who use StudySoup to get ahead
8 Pages 44 Views 35 Unlocks
  • Better Grades Guarantee
  • 24/7 Homework help
  • Notes, Study Guides, Flashcards + More!
Join more than 18,000+ college students at Florida State University who use StudySoup to get ahead
School: Florida State University
Department: Accounting
Course: Financial Accounting
Professor: Ronald Pierno
Term: Summer 2015
Tags:
Name: ACG Study Guide Exam 2
Description: study guide for chapter 4 and 5.
Uploaded: 02/19/2018
8 Pages 44 Views 35 Unlocks
  • Better Grades Guarantee
  • 24/7 Homework help
  • Notes, Study Guides, Flashcards + More!
Join StudySoup for FREE
Get Full Access to FSU - ACG 2021 - Study Guide - Midterm
Join with Email
Already have an account? Login here
×
Log in to StudySoup
Get Full Access to FSU - ACG 2021 - Study Guide - Midterm

Forgot password? Reset password here

Reset your password

I don't want to reset my password

Need help? Contact support

Need an Account? Is not associated with an account
Sign up
We're here to help

Having trouble accessing your account? Let us help you, contact support at +1(510) 944-1054 or support@studysoup.com

Got it, thanks!
Password Reset Request Sent An email has been sent to the email address associated to your account. Follow the link in the email to reset your password. If you're having trouble finding our email please check your spam folder
Got it, thanks!
Already have an Account? Is already in use
Log in
Incorrect Password The password used to log in with this account is incorrect
Try Again

Forgot password? Reset it here