财务会计ch03.ppt

2023-4-13财务会计财务会计财务会计财务会计Financial Accounting, Sixth Edition财务会计财务会计财务会计Generally a month, a quarter, or a year.Fiscal year vs. calendar yearAlso known as the “Periodicity Assumption”Accountants divide the economic life of a business into artificial time periods (Time Period Assumption).Jan.Feb.Mar.Apr.Dec. . . . .财务会计revenue should be recognized in the accounting period in which it is earned.b. expenses should be matched with revenues.c. the economic life of a business can be divided into artificial time periods.d. the fiscal year should correspond with the calendar year.财务会计Accrual-Basis AccountingTransactions recorded in the periods in which the events occur.Revenues are recognized when earned, rather than when cash is received. Expenses are recognized when incurred, rather than when paid.Accrual- vs. Cash-Basis Accounting财务会计Cash-Basis AccountingRevenues are recognized when cash is received.Expenses are recognized when cash is paid. Cash-basis accounting is not in accordance with generally accepted accounting principles (GAAP).Accrual- vs. Cash-Basis Accounting财务会计Revenue Recognition PrincipleRecognizing Revenues and ExpensesCompanies recognize revenue in the accounting period in which it is earned.In a service enterprise, revenue is considered to be earned at the time the service is performed.财务会计Matching PrincipleRecognizing Revenues and ExpensesMatch expenses with revenues in the period when the company makes efforts to generate those revenues.“Let the expenses follow the revenues.”财务会计GAAP relationships in revenue and expense recognition财务会计One of the following statements about the accrual basis of accounting is false. That statement is:a. Events that change a companys financial statements are recorded in the periods in which the events occur.b. Revenue is recognized in the period in which it is earned.c. The accrual basis is in accordance with generally accepted accounting principles.d. Revenue is recorded only when cash is received, and expense is recorded only when cash is paid.财务会计Adjusting entries make it possible to report correct amounts on the balance sheet and on the income statement.A company must make adjusting entries every time it prepares financial statements.财务会计. 财务会计Adjusting entries are made to ensure that:a. expenses are recognized in the period in which they are incurred.b. revenues are recorded in the period in which they are earned.c. balance sheet and income statement accounts have correct balances at the end of an accounting period.d. all of the above.财务会计Deferrals1. Prepaid Expenses. Expenses paid in cash and recorded as assets before they are used or consumed.2. Unearned Revenues. Cash received and recorded as liabilities before revenue is earned.Accruals1. Accrued Revenues. Revenues earned but not yet received in cash or recorded.2. Accrued Expenses. Expenses incurred but not yet paid in cash or recorded.财务会计 Each account is analyzed to determine whether it is complete and up-to-date.PIONEER ADVERTISING AGENCY INC.Trial BalanceOctober 31, 2008AccountDebitCreditCash$ 15,200Advertising Supplies2,500Prepaid Insurance600Office Equipment5,000Notes Payable$ 5,000Accounts Payable2,500Unearned Revenue1,200Common Stock10,000Retained Earnings0Dividends500Service Revenue10,000Salaries Expense4,000Rent Expense900 $28,700 $ 28,700财务会计Deferrals are either: Prepaid expenses or Unearned revenues.财务会计Cash PaymentExpense RecordedBEFORE财务会计Prepaid ExpensesCosts that expire either with the passage of time or through use.Adjusting entries(1) to record the expenses that apply to the current accounting period, and(2) to show the unexpired costs in the asset accounts.财务会计Illustration 3-4Adjusting entries for prepaid expensesIncreases (debits) an expense account and Decreases (credits) an asset account.财务会计 Cash600Prepaid insurance600Oct. 4DebitCreditPrepaid InsuranceDebitCreditCash财务会计 Prepaid insurance50Insurance expense50Oct. 31DebitCreditPrepaid InsuranceDebitCreditInsurance Expense财务会计DepreciationBuildings, equipment, and vehicles (long-lived assets) are recorded as assets, rather than an expense, in the year acquired.Companies report a portion of the cost of a long-lived asset as an expense (depreciation) during each period of the assets useful life (Matching Principle).财务会计 Cash5,000Equipment5,000Oct. 2DebitCreditEquipmentDebitCreditCash财务会计 Accumulated depreciation-office equipment40Depreciation expense40Jan. 31DebitCreditDepreciation ExpenseDebitCreditAccumulated Depreciation财务会计Depreciation (Statement Presentation)Accumulated Depreciationis a contra asset account.Appears just after the account it offsets (Equipment) on the balance sheet. Office equipment$5,000Less: Accumulated depreciation-Office Equipment 40 $4,960财务会计Cash ReceiptRevenue RecordedBEFORE财务会计Unearned RevenuesCompany makes an adjusting entry to record the revenue that has been earned and to show the liability that remains.The adjusting entry for unearned revenues results in a decrease (a debit) to a liability account and an