ACCT 2101 Lecture Notes - Lecture 3: Trial Balance, Financial Statement, Deferral

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jaderaccoon449

15 Sep 2017

School

University of Georgia

Department

Accounting

Course

ACCT 2101

Professor

Bhandarkar

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Document Summary

The accounting cycle (part 2) | lecture 3. Accrual basis: cash basis: not consistent with gaap, revenues are recognized when cash is received, expenses are recognized when cash is paid, accrual basis, revenues are recognized when, expenses are recognized when, example: Prepaid expenses- depreciation: depreciation: buildings, equipment, vehicles (long-lived assets/plant assets) are recorded as assets when purchased. The cost of the plant assets is then allocated or spread out and recorded as an expense over their expected useful lives. Subsequent receipt of payment on completion of contract. The adjusted trial balance: after all adjusting entries are journalized and posted, the company prepares another trial balance from the ledger accounts. Info from this adjusted trial balance is used to prepare financial statements. The closing process: temporary accounts: accumulate info for one accounting period only. ___________ out at the end of the accounting period: permanent accounts: accumulate info for present and future accounting periods.

Related Questions

1. Undercash-basis accounting, when is revenue recorded? When is itrecorded under accrual-basis accounting?

2. Under accrualaccounting, when is revenue considered earned?

3. If amembership represents an advance payment for services provided,when is it recognized as revenue under the accrual basis, and whatis it called?

4. Why isinsurance expense spread over multiple periods even though thepolicy coverage is paid in advance?

5. At the end ofthe month for Silverâs Gym, what entries need to be made under thecash basis of accounting for wages that have not yet been paid?What entries need to be made under the accrual method?

6. Why is itimportant to match expenses and revenues to reflect the performanceof a business over a particular time period?

7. When mightthe use of cash basis accounting overstate the actual profitsearned by Silverâs gym? When might it understate the actual profitsearned?

8. Which basisof accounting is in accordance with GAAP for large companies?

puceeagle823

(Learning Objective 1: Explain how accrual accounting differs from cash-basis accounting)âHough Consulting had the following selected transactions in July:

July 1 Prepaid insurance for July through September, $4,200.

2 Purchased office furniture for cash, $5,000.

3 Performed consulting services for a client on account, $3,500.

5 Paid advertising expense, $500.

10 Performed consulting services and received cash, $1,500.

20 Purchased a computer on account, $2,500.

25 Collected for July 3 service.

26 Paid account payable from July 20.

29 Paid salary expense, $1,800.

31 Adjusted for July insurance expense (see July 1).

31 Earned revenue of $1,000 that was collected in advance back in June.

31 Recorded July depreciation on fixed assets, $125.

LO USING EXCEL:

1. Show how each transaction would be handled (in terms of recognizing revenues and expenses) using the cash basis and the accrual basis.

2. Compute July income (loss) before tax under each accounting method

3. Indicate which measure of net income or net loss is preferable. Use the transactions on July 3 and July 25 to explain.

Req. 1 & 2
Hough Consulting
Amount of Revenue (Expense) for July
Date		Cash Basis	Accrual Basis
July 1












	Income (loss) before tax	$ -	$ 0

Req. 3

greyplatypus825

(Learning Objective 1: Explain how accrual accounting differs from cash-basis accounting)âHough Consulting had the following selected transactions in July: