SMG AC 221 Lecture Notes - Lecture 4: Retained Earnings, Financial Statement, Deferred Income
30 Sep 2016
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Accrual income or expenses now, change in cash later. Deferrals change in cash now, income or expense later (ie deferred revenue) Whether to recognize and asset = whether to defer an expense. Answer depends on the possibility of future income. *example: buy a building, value accredited to land so that they save more future money on plant/equipment depreciation. Without being able to provide a 29551 value, it is difficult to assume that a future benefit is significant enough to be labeled an asset. Ie insurance settlement from hitting a little old lady with a delivery truck. Coke will have to pay more to their insurance company in the future. They are receiving the insurance coverage now in court/lawsuit, but their rates will go up in the future. Temporary/flow accounts accounts that record changes in equity for a specific period of time (ie a year or quarter)
