BU127 Lecture Notes - Lecture 5: Deferred Income, Retained Earnings, Gross Margin
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BU127 Full Course Notes
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Bu127 lecture #5: operating decisions and the statement of earnings. Business background businesses develop: goals, plans, strategies, measurable indicators the goals include elements of income. The periodicity assumption to meet the needs of decision makers, we report financial information for relatively short time periods (monthly, quarterly, annually) Dr: cash (+a), cr: deferred revenue (+l: when the company delivers the goods or services deferred revenue is reduced and revenue is recorded. Dr: cash (+a), cr: revenue (+r) situation #3: cash is received after revenue is earned: if cash is received after the company delivers goods or services, an asset account trade receivables is recorded. Dr: trade receivables (+a), cr: revenue (+r: when the cash is received, the trade receivables is reduced. Dr: cash (+a), trade receivables (-a: assets reflecting revenues earned but not yet received in cash include. Dr: prepaid expense (+a), cr: cash (-a: when the expense is incurred prepaid expense is reduced and an expense is recorded.
