COMMERCE 1AA3 Lecture Notes - Lecture 4: Financial Statement, Going Concern, Deferral
21 Mar 2016
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August 1, 2015, a tenant leases a property for one year. December 31, 2015 the tenant has not paid any rent yet. To record the recognition of rent expense and rent payable: Without the above adjusting entry, income is overstated and liabilities are understated. In this case, accounting information is not faithfully. July 31 2016: tenant pays and moves out. Recognize revenues when: the earnings process is complete or nearly complete, an exchange transaction takes place, collection is reasonably assured. Resources consumed to earn revenues in an accounting period should be recorded in that period, regardless. Your asset becomes an expense when you use it to generate revenue. A laptop purchased for , and is expected to be used for three years. Since the laptop will help generate revenues for three years, we must recognize an annual depreciation expense of . Depreciation is the allocation of the asset"s cost over its useful life to match revenues with expenses.
