Beruflich Dokumente
Kultur Dokumente
Annually
1 2
Semiannually
1 2 3 4
Quarterly
1 2 3 4 5 6 7 8 9 10 11 12
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Monthly
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2008
3-7
C1
Accrual Basis vs. Cash Basis
Accrual Basis Cash Basis
Revenues are Revenues are
recognized when recognized when
earned and expenses cash is received and
are recognized when expenses recorded
incurred. when cash is paid.
Not GAAP
Accounting
$ - $ - $ - $ -
May Jun Jul Aug
$ - $ - $ - $ -
Sep Oct Nov Dec
$ - $ - $ - $ 2,400
$ - $ - $ - $ -
May Jun Jul Aug On the accrual basis
$ - $ - $ - $ -
Sep Oct Nov Dec $100 of insurance
$ - $ - $ - $ 100 expense is recognized in
Jan
Insurance Expense 2008
Feb Mar Apr
2007, $1,200 in 2008,
$ 100
May
$ 100
Jun
$ 100
Jul
$ 100
Aug
and $1,100 in 2009. The
$ 100 $ 100 $ 100 $ 100 expense is matched with
Sep Oct Nov Dec
$ 100 $ 100 $ 100 $ 100 the periods benefited by
Jan
Insurance Expense 2009
Feb Mar Apr
the insurance coverage.
$ 100 $ 100 $ 100 $ 100
May Jun Jul Aug
$ 100 $ 100 $ 100 $ 100
Sep Oct Nov Dec
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2008
$ 100 $ 100 $ 100 $ -
3-10
C1
Recognizing Revenues
Revenue Recognition
We have delivered the
product to our customer,
so I think we should record
the revenue earned.
Revenue Recognition
Matching Now that we have
Summary
recognized the revenue,
of Expenses let’s see what expenses
Rent $1,000 we incurred to
Gasoline 500 generate that revenue.
Advertising 2,000
Salaries 3,000
Utilities 450
and . . . . ....
Paid (or received) cash before Paid (or received) cash after
expense (or revenue) recognized expense (or revenue) recognized
Asset Expense
Unadjusted Credit Debit
Balance Adjustment Adjustment
Accumulated depreciation is
a contra asset account.
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2008
3-19
P1
Depreciation
Accumulated Depreciation
12/31 12,000
Barton, Inc.
Partial Balance Sheet
At December 31, 2007 Equipment is
Assets $ shown net of
Cash accumulated
.
Equipment $ 62,000
depreciation.
Less: accumulated deprec. (12,000) 50,000
.
.
Total Assets
Cash received in
advance of
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products or
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Liability Revenue
Debit Unadjusted Credit
Adjustment Balance Adjustment
Unearned Revenue
Oct.1 100,000
Expense Liability
Debit Credit
Adjustment Adjustment
Asset Revenue
Debit Credit
Adjustment Adjustment
Unadjusted Adjusted
Trial Balance Adjustments Trial Balance
Dr. Cr. Dr. Cr. Dr. Cr.
Cash 3,950
Accounts receivable - f 1,800
Supplies 9,720 b 1,050
Prepaid insurance 2,400 a 100
Equipment 26,000 Next,
Accum. depr. - Equip.
Accounts payable
-
6,200
c 375
FastForward’s
Salaries payable - e 210 adjustments
Unearned revenue 3,000 d 250
Common Stock 30,000 are added.
Retained Earnings 0
Dividends 600
Consulting revenue 5,800 d 250
f 1,800
Rental revenue 300
Depr. expense - c 375
Salaries expense 1,400 e 210
Insurance expense - a 100
Rent expense 1,000
Supplies expense - b 1,050
Utilities expense 230
Totals $45,300 $45,300 $3,785
McGraw-Hill/Irwin © $3,785
The McGraw-Hill Companies, Inc., 2008
3-32
P2
FastForward - Trial Balance - December 31, 2007
Unadjusted Adjusted
Trial Balance Adjustments Trial Balance
Dr. Cr. Dr. Cr. Dr. Cr.
Cash 3,950 3,950
Accounts receivable - f 1,800 1,800
Supplies 9,720 b 1,050 8,670
Prepaid insurance 2,400 a 100 2,300
Equipment 26,000 26,000
Accum. depr. - Equip. - c 375 375
Accounts payable 6,200 6,200
Salaries payable - e 210 210
Unearned revenue 3,000 d 250 2,750
Common Stock 30,000 - 30,000
Retained Earnings - -
Dividends 600 600
Consulting revenue 5,800 d 250 7,850
f 1,800
Rental revenue 300 300
Depr. expense - c 375 375
Salaries expense 1,400 e 210
Finally, the 1,610
Insurance expense - a 100 totals are 100
Rent expense 1,000 determined. 1,000
Supplies expense - b 1,050 1,050
Utilities expense 230 230
Totals $45,300 $45,300 $3,785 $3,785 $47,685 $47,685
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2008
3-33
P3 Preparing Financial
Statements
Adjusted
Trial Balance
December 31, 2007
Dr. Cr.
FastForward
Cash $ 3,950 Income Statement
Accounts receivable 1,800
For the Month Ended December 31, 2007
Supplies 8,670
Prepaid insurance 2,300 Revenues:
Equipment 26,000 Consulting revenue $ 7,850
Accum. depr. - Equip. $ 375
Accounts payable 6,200 Rental revenue 300
Salaries payable 210 Operating expenses:
Unearned revenue 2,750
Common Stock 30,000
Depr. expense - Equip. $ 375
Retained Earnings - Salaries expense 1,610
Dividends 600
Insurance expense 100
Consulting revenue 7,850
Rental revenue 300 Rent expense 1,000
Depr. expense 375 Supplies expense 1,050
Salaries expense 1,610
Insurance expense 100
Utilities expense 230
Rent expense 1,000 Total expenses 4,365
Supplies expense 1,050
Utilities expense 230
Net income $ 3,785
Totals $ 47,685 $ 47,685
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2008
3-35
P3 2. Prepare Statement of Retained Earnings
Adjusted FastForward
Trial Balance Balance Sheet
December 31, 2007
Dr. Cr.
Cash $ 3,950 Assets
Accounts receivable 1,800 Cash $ 3,950
Supplies 8,670 Accounts receivable 1,800
Prepaid insurance 2,300 Supplies 8,670
Equipment 26,000 Prepaid insurance 2,300
Accum. depr. - Equip. $ 375 Equipment 26,000
Accounts payable 6,200 Less: accum. depr. (375) 25,625
Salaries payable 210 Total assets $ 42,345
FastForward
Unearned revenue 2,750 Liabilities
Statement of Retained Earnings
Chuck Taylor, Capital 30,000 Accounts payable $ 6,200
ChuckForTaylor,
the Month
Withd'l.Ended December
600 31, 2007 Salaries payable 210
Consulting revenue 7,850 Unearned revenue 2,750
Rental revenue
Retained earnings, 12/1/07 $ 300 -0- Total liabilities $ 9,160
Depr. expense 375 Equity
Add: Net
Salaries income
expense 1,610 3,785
Common stock 30,000
Less: Dividends
Insurance expense 100 600 Retained earnings 3,185
Rent expenseearnings 12/31/07
Retained 1,000 $ 3,185 Total liabilities and equity $ 42,345
Supplies expense 1,050
Utilities expense 230
Totals $ 47,685 $ 47,685
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2008
3-37
C4
Temporary and Permanent
Accounts
Temporary (nominal) accounts accumulate data related to
one accounting period. They include all income statement
accounts, the dividends account, and the Income Summary
account. These accounts are “closed” at the end of the period
to get ready for the next accounting period.
$ 7,000
Income Summary
Determine the
$ 18,100 $ 25,000 balance in the
$ 6,900 Income Summary
account.
Prepare Prepare
unadjusted Adjust adjusted
trial balance trial balance
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2008
3-48
C6
Classified Balance Sheet
Long-Term Investments
Plant Assets
Intangible Assets
Current Ratio
4.0
3.0
Limited Brands, Inc.
2.0
Industry average
1.0
-
2005 2004 2003 2002
End of Chapter 3