ACG 2021 Lecture Notes - Lecture 4: Matching Principle, Deferral, Accrual
Document Summary
Standard classifications: assets (4: current assets 2. Standard classifications: liabilities and stockholder"s equity (3) current liabilities, long-term liabilities, stockholder"s equity. Current assets (2) prepaid expenses: expenses paid for in advance (ex. prepaid insurance) short-term investments. Types of current assets (5) cash short-term investments accounts and notes receivable inventory and supplies prepaid expenses. Investments in stocks and bonds of other companies held for more than 1 year. Not used in operating the business (e. g. holding real estate) Property, plant, and equipment (pp&e) long-term assets used in operating the business. Depreciation allocation of the cost of an asset over its useful life goes under pp&e. Accumulated depreciation shows the total amount of deprecation a company has expensed in an asset"s life. Assets with no physical substance (e. g. patents, trademarks) Accrual accounting is used (as opposed to cash accounting) Transactions recorded in the periods in which the events occur. Revenues are recognized when earned, not when cash is received.
