ACG-2021 Lecture Notes - Lecture 4: Deferral, Accrual, Fiscal Year
Document Summary
Accountants divide the economic life of a business into arti cial time periods (periodicity. Companies recognize revenue in the accounting period in which the performance obligation is satis ed. Match expenses with revenues in the period when the company makes efforts to generate those revenues. Revenues are recognized only when cash is received. Expenses are recognized only when cash is paid. Prohibited under generally accepted accounting principles (gaap). Transactions recorded in the periods in which the events occur. Revenues are recognized when services performed, even if cash was not received. Expenses are recognized when incurred, even if cash was not paid. Ensure that the revenue recognition and expense recognition principles are followed. Are required every time a company prepares nancial statements. Includes one income statement account and one balance sheet account. Deferrals: prepaid expenses: expenses paid in cash and recorded as assets before they are used or consumed, unearned revenues: cash received before services are performed.
