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ACG 2021

ACG 2021. Chapter 3 Summary. Two methods of Accounting. Cash Accrual Time-Period Concept Revenue Recognition Principle Matching Concept. Two types of Accrual Accounting. Accruals Transactions recorded before Cash exchanged Deferrals

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ACG 2021

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  1. ACG 2021 Chapter 3 Summary

  2. Two methods of Accounting • Cash • Accrual • Time-Period Concept • Revenue Recognition Principle • Matching Concept

  3. Two types of Accrual Accounting • Accruals • Transactions recorded before Cash exchanged • Deferrals • Transactions recorded before Revenue/Expense is Earned/Incurred

  4. Deferrals Revenue Recognition • Initial Transaction • We Receive Cash in Advance • Cash xxxx • Unearned Service Revenue xxxx • We pay Cash in Advance • Ppd Asset xxxx • Cash xxxxx • Subsequent(Adjusting) Transaction • Provide Service or Goods (Earn Revenue) • Unearned Revenue xxxx • Service Revenue xxxxx • Use up Prepaid Asset • Expense xxxxx • Ppd Asset xxxxx Balance Sheet Accounts Matching Concept Balance Sheet and Income Statement

  5. Accruals Matching Concept • Initial Transaction • Incurred an Expense before paying for it • Expense xxxxx • Payable xxxxx • We earn Revenue before receiving cash • Receivable xxxxx • Revenue xxxxx • Subsequent(Adjusting) Transaction • Pay for Expense previously incurred • Payable xxxx • Cash xxxx • Receive Cash Owed to us • Cash xxxxx • Receivable xxxxx B/S & I/S Revenue Recognition B/S only

  6. Closing The Accounts • Permanent Accounts • B/S • Temporary Accounts • Income Statement • Revenues closed to Retained Earnings • Revenue xxxx • Retained Earnings xxxx • Expenses closed to Retained Earnings • Retained Earnings xxxx • Expenses xxxx

  7. Ratios • Current • Current Assets / Current Liabilities • Debt • Total Liabilities / Total Assets

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