- Accrual accounting (19)
- Revenues and expense are recorded when it occurs
- Types of accruals:
- Unearned revenue (20): receive cash before providing good or service
- Cash increase, liability increase
- Newspaper subscription
- Accrued revenue (21): provide goods or services before receive cash payment
- Revenue increase (equity) , account receivable increase (asset)
- Manufacturer:
- Records revenue when it delivers the goods
- Not receive cash until retailers sell the goods to consumers
- Prepaid expense (22): pay cash ahead of time
- Cash (asset) decrease, prepaid expense (asset) increase
- Expense actually incurred: Prepaid expense (asset) decrease, expense (- equity) increase
- Accrued expense (23): Owe cash
- Expense (-equity) increase, liability for accrued expense (liability) increase
- Pay cash: liability decreases, cash (asset) decrease
- Unearned revenue (20): receive cash before providing good or service
(Equity) Revenue: Good out
(Equity) Expense: Good in
(Asset) Prepaid expense: cash out
(Asset) Unearned revenue: cash in
- Valuation adjustment (24)
- Accounting entries that updates asset’s value as market value
- Change in asset values also change owner’s equity