lecture-3---accruals---student(存儲(chǔ)版)
【正文】 ervices to its clients but no cash has been collected. Event 3: Cato collected $60,000 cash from customers in partial settlement of its accounts receivable. Event 4: Cato paid the instructor $10,000 cash for teaching training courses (salary expense). Event 5: Cato paid $2,000 for advertising costs. The advertisements appeared in 2022. 9 10 Equity $ $ Trade Receivables $ $ Revenue $ $ DR CR Cash $ $ DR CR DR CR DR CR 11 Salaries $ $ DR CR Advertising $ $ Accruals/Matching – Extended Example 2 Summary to date C a s h + A / R = L i a b s + O r d s h a r e s + R e t a i n e d E a r n i n g s 12 Prepayments and Accruals ? Some expenses are paid this year, but in fact relate to next year PREPAYMENTS ? Other expenses have been incurred but have not yet been invoiced – ACCRUED CHARGES ? How can we adjust for this? 13 Exercise Think of 4 examples of accruals and prepayments 14 Suggested solution Accruals Prepayments 15 Accruals ? An accrual is an amount owing for a service provided during a particular accounting period and still unpaid for at the end of it. ? It is usually based on an estimate of the likely cost of the service ? This estimate is usually based on past records 16 Prepayments ? A prepayment is an amount paid in cash during an accounting period for a service that will be provided in a subsequent period ? It is usually based on the proportion of the amount paid that relates to a subsequent period 17 Prepayments ? Some expenses are paid in advance of the period to which they relate。 . insurance, business rates, rent. To apply the accruals concept, we must ensure that the expense is charged in the ine statement for the correct year for which it is incurred. ? To adjust the expense from the cash amount PAID to the amount of expenses incurred adjust by: – Add to prepayments (appears in Statement of Financial Position, SOFP) – Reduce the expense a/c (appears in Ine Statement) 18 Example Rent and Rates ? Rent of $26,000 has been paid in cash throughout the year ? $2,000 of this amount actually applies to the first month of the
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