New User Special Price Expires in

Let's log you in.

Sign in with Facebook


Don't have a StudySoup account? Create one here!


Create a StudySoup account

Be part of our community, it's free to join!

Sign up with Facebook


Create your account
By creating an account you agree to StudySoup's terms and conditions and privacy policy

Already have a StudySoup account? Login here

ACC 131 Seipp Week 4 Lecture Notes: 9/8-9/11

by: Daniel Hemenway

ACC 131 Seipp Week 4 Lecture Notes: 9/8-9/11 ACC 131

Marketplace > Illinois State University > Accounting > ACC 131 > ACC 131 Seipp Week 4 Lecture Notes 9 8 9 11
Daniel Hemenway
GPA 3.93
Financial Accounting
Edward Seipp

Almost Ready


These notes were just uploaded, and will be ready to view shortly.

Purchase these notes here, or revisit this page.

Either way, we'll remind you when they're ready :)

Preview These Notes for FREE

Get a free preview of these Notes, just enter your email below.

Unlock Preview
Unlock Preview

Preview these materials now for free

Why put in your email? Get access to more of this material and other relevant free materials for your school

View Preview

About this Document

I am an Elite Note Taker and I will be posting notes each week, along with study guides for exams for BSC 101 (Helms), ACC 131 (Seipp), and ECO 105 (Goel). Give them a look and refer your friends ...
Financial Accounting
Edward Seipp
Class Notes
25 ?




Popular in Financial Accounting

Popular in Accounting

This 4 page Class Notes was uploaded by Daniel Hemenway on Sunday September 13, 2015. The Class Notes belongs to ACC 131 at Illinois State University taught by Edward Seipp in Summer 2015. Since its upload, it has received 50 views. For similar materials see Financial Accounting in Accounting at Illinois State University.

Popular in Accounting


Reviews for ACC 131 Seipp Week 4 Lecture Notes: 9/8-9/11


Report this Material


What is Karma?


Karma is the currency of StudySoup.

You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!

Date Created: 09/13/15
ACC 131 Seipp 98911 Chapter 3 Accrual Accounting Completing the Accounting Cycle This requires preparation of Adjusting journal entries financial statements from the Adjusted accounts and closing the accounts in order to prepare for the next accounting period Accrual vs Cash Basis of Accounting CashBasis Accounting Revenue is recorded when cash is received regardless of when it is actually earned AccrualBasis Accounting also called accrual accounting Is an alternative to cashbasis accounting that is required by GAAP Under accrual accounting transactions are recorded when they occur Accrual accounting is superior to cashbasis because it links income measurement to selling the principle activity of the company Time Period Assumption TimePeriod Assumption Allows companies to artificially divide their operations into time periods so they can satisfy users demands for information Companies frequently engage in continuing activities that affect more than one time period Accrual accounting requires companies to assign revenues and expenses to the proper time period This is often a difficult task and is guided by the Revenue Recognition and Matching Principles The Revenue Recognition Principle The Revenue Recognition Principle Determines when revenue is recorded and reported Under this principle revenue is recognized or recorded in the period in which both of the following conditions are met The revenue has been earned The collection of cash is reasonably assured Revenue is recorded when these two conditions are met regardless of when cash is received ACC 131 Seipp 98911 The Expense Recognition or Matching Principle Expense Recognition or Matching Principle The process of identifying an expense with a particular time period The key idea is that an expense is recorded when it is incurred regardless of when cash is paid Under accrual accounting expenses are recognized following the expense recognition matching principle which requires that expenses be recorded and reported in the same period as the revenue Expenses for an accounting period should include only those costs used to earn revenue that was recognized in the accounting period The key to expense recognition is matching the expense with revenue Accrual Accounting and Adjusting Entries Adjusting Entries Journal entries made at the end of an accounting period to record the completed portion of partially completed transaction Only done when preparing to do financial statements Adjusting entries are necessary to apple the revenue recognition and matching principles and ensure that a company s financial statements include the proper amount for revenues expenses assets liabilities and stockholders equity Step 5 Adjusting the Accounts Adjustments are often necessary because timing differences exist between when a revenue or expense is recognized and cash is received or paid The purpose of all Adjustments is to make sure revenues and expenses get recorded in the proper time period All Adjusting entries will affect at least one income statement account and one balance sheet account Note that cash is never affected by Adjustments Types of Adjusting Entries Two different categories Accruals Happened but not yet recorded Deferrals Have paid for or have been paid but not yet recorded ACC 131 Seipp 98911 Three StepProcess for Making Adjusting Entries 1 Identify what the accounts are income statement and balance sheet accounts that require Adjustments 2 Calculate the amount of the Adjustments based on the amount of revenue that was earned or the amount of expense that was incurred during the accounting period 3 Record the Adjustmentjournal entry Accrued Revenues Companies often engage in revenueproducing activities but are not paid until after the activities are complete Accrued Revenues Transactions where a company has earned revenue but not received the cash Example Interest Earned but not yet received on a loan Accrued Expenses Accrued Expenses Previously unrecorded expenses that have been incurred but not yet paid in cash Many companies incur expenses in the current accounting period but do not pay cash for these expenses until a later period Deferred Unearned Revenues Deferred Unearned Revenues Transactions for which a company has received cash but has not yet earned the revenue Examples Rent received in advance magazine or newspaper subscriptions received in advance and tickets airlines sporting events concerts sold in advance In all of the example situations the receipt of cash creates a liability for the company to deliver goods or perform services in the future The unearned revenue account delays or defers the recognition of revenue by recording the revenue as a liability until it is earned Deferred Prepaid Expenses Companies often acquire goods and service before they are used Theses prepayments are recorded as assets called Deferred or Prepaid Expenses The deferral of the expense is necessary because the initial cash payment did not result in an expense but an asset that results in future benefits ACC 131 Seipp 98911 Depreciation Depreciation Because property plant and equipment longlived assets help to produce revenue over a number of years instead ofjust one period the matching principle requires companies to systematically assign or allocate the cost of these assets as expense to each period in which they are used The depreciation process requires an Adjustment to recognize the expense incurred during the period and reduce the longlived asset The unused portion of a longlived asset is reported on the balance sheet Contra Accounts Accountants normally use a contra account to reduce the amount of a long lived asset Contra Accounts Accounts that have a balance that is opposite of the balance in the related account Example Accumulated Depreciation account Therefore while an asset has a normal debit balance a contra asset account has a normal credit balance Contra asset account balance is deducted from the balance of the related asset account in the financial statement balance sheet and the resulting difference is known as the book value of the asset There is no Contra Dividend Account


Buy Material

Are you sure you want to buy this material for

25 Karma

Buy Material

BOOM! Enjoy Your Free Notes!

We've added these Notes to your profile, click here to view them now.


You're already Subscribed!

Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'

Why people love StudySoup

Steve Martinelli UC Los Angeles

"There's no way I would have passed my Organic Chemistry class this semester without the notes and study guides I got from StudySoup."

Janice Dongeun University of Washington

"I used the money I made selling my notes & study guides to pay for spring break in Olympia, Washington...which was Sweet!"

Bentley McCaw University of Florida

"I was shooting for a perfect 4.0 GPA this semester. Having StudySoup as a study aid was critical to helping me achieve my goal...and I nailed it!"

Parker Thompson 500 Startups

"It's a great way for students to improve their educational experience and it seemed like a product that everybody wants, so all the people participating are winning."

Become an Elite Notetaker and start selling your notes online!

Refund Policy


All subscriptions to StudySoup are paid in full at the time of subscribing. To change your credit card information or to cancel your subscription, go to "Edit Settings". All credit card information will be available there. If you should decide to cancel your subscription, it will continue to be valid until the next payment period, as all payments for the current period were made in advance. For special circumstances, please email


StudySoup has more than 1 million course-specific study resources to help students study smarter. If you’re having trouble finding what you’re looking for, our customer support team can help you find what you need! Feel free to contact them here:

Recurring Subscriptions: If you have canceled your recurring subscription on the day of renewal and have not downloaded any documents, you may request a refund by submitting an email to

Satisfaction Guarantee: If you’re not satisfied with your subscription, you can contact us for further help. Contact must be made within 3 business days of your subscription purchase and your refund request will be subject for review.

Please Note: Refunds can never be provided more than 30 days after the initial purchase date regardless of your activity on the site.