ACC 231 Lecture Notes - Lecture 4: General Ledger, Matching Principle, Accounting Information System

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Revenue recognition principle: revenues recognized when earned ( provide a good or service). Cash may or may not have changed hands. Matching principle: match costs in the period they are incurred to produce revenue. (match revenues with the costs that help generate them) Accrual- increase the expense or revenue but cash changes hands after expense is incurred or revenue is earned. Deferral- put off recording revenue or expense even though cash changed hands. Cash changes hands before expense is incurred or revenue is earned. After an accrual or deferral is recorded a 2nd journal entry needs to be recorded. When a deferral is recorded the expense or revenue needs to be recorded in a future period. When an accrual is recorded the asset or liability needs to be cleared when cash changes hands. Unearned revenue (liability)-a customer pays for a good/service before the good/service is provided.

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