MGMT 2101 Lecture Notes - Lecture 2: Deferral, Accounts Payable, Deferred Income
Document Summary
Today"s word operates that many transactions are not paid for initially, people use credit, credit cards, account with the company (telus, bell) The whole amount is not expensed when you pay for it-it is spread out over the time frame you paid for, usually you expense a proportionate amount each month. You pay your tuition of on september 1 for both semester that end april 30th. You are updating your balance sheet on december 31. 8000 you need make an adjusting entry to bring the books up to date for the last 4 months. Rule: whenever current assets are used up, an expense is created (for things like inventory an prepaids) Rule: adjusting entries which are entries to bring the books up to date at year end never involve cash. On sept 1, dal has your money but they haven"t done anything to earn it yet.