LECTURE 6 RECOGNITION OF REVENUE & EXPENSES

1. REALIZATION PRINCIPLE REVENUE

1.1. Cash received in the SAME period Dr. Cash Cr. Service Revenue

1.2. Cash is received BEFORE the period Dr. Unearned Revenue Cr. Service Revenue

1.3. Cash is received AFTER the period Dr. Account Receivable Cr. Service Revenue

2. MATCHING PRINCIPLE EXPENSES

2.1. Cash is paid on SAME period Dr. Expenses Cr. Cash

2.2. Cash is paid BEFORE the period Dr. Expenses Cr. Prepaid Expenses

2.3. Cash is paid AFTER the period Dr. Account Payable Cr. Cash

3. Adjusting Entries

3.1. PREPAYMENTS

3.1.1. PREPAID EXPENSES ( ASSETS)

3.1.2. PREPAID REVENUE (LIABILITY)

3.2. ACCRUALS

3.2.1. ACCRUED EXPENSES (LIABILITY)

3.2.2. ACCRUED REVENUE ( ASSETS)