COB 241 September 5, 2018

Adminisration Tutoring Group Emails? Seating Chart

QUESTIONS, ISSUES, UNCERTAINTIES from the homework?

COB 241 – UNIT 3

Entity Principle ASSETS = EQUITY

Entity Principle ASSETS = EQUITY

Entity Principle ASSETS = EQUITY

Entity Principle ASSETS = LIABILITIES + EQUITY

Entity Principle Period Principle RESULTS OF OPERATIONS & FINANCIAL POSITION

Entity Principle Period Principle INCOME STATEMENT & BALANCE SHEET For the period ending (date) As of (date) CLOSING DATE

Entity Principle Period Principle Matching Principle RECOGNIZE REVENUE in the period in which it is earned Period Principle Matching Principle INCOME STATEMENT

Entity Principle Period Principle Matching Principle RECOGNIZE REVENUE in the period in which it is earned Period Principle RECOGNIZE EXPENSES in the period in which it is incurred Matching Principle INCOME STATEMENT

Entity Principle Period Principle Matching Principle RECOGNIZE REVENUE in the period in which it is earned Period Principle RECOGNIZE EXPENSES in the period in which it is incurred Matching Principle INCOME STATEMENT

Entity Principle Period Principle Matching Principle RECOGNIZE REVENUE in the period in which it is earned Period Principle RECOGNIZE EXPENSES in the period in which it is incurred Matching Principle INCOME STATEMENT

Expense The “using up” of any asset… … in an attempt to generate revenue. Notice that “using up” is not the same as “paying” for that usage.

ACCRUAL ACCOUNTING

Accounts Receivable ASSET The “RIGHT” to collect money from a customer to whom the business has sold goods or services.

Accounts Receivable ASSET The “RIGHT” to collect money from a customer to whom the business has sold goods or services. Cato Consultants provided $84,000 of consulting services to its clients. Cato has completed the work, and billed the clients, but has not yet collected any cash.

Accounts Receivable ASSET The “RIGHT” to collect money from a customer to whom the business has sold goods or services. Cato Consultants provided $84,000 of consulting services to its clients. Cato has completed the work, and billed the clients, but has not yet collected any cash. Later, the clients pay $60,000 in partial settlement for the bills.

Accounts Payable The obligation to pay a vendor for goods or services provided by that vendor, but not yet paid.

CLOSING THE PERIOD Make all adjusting entries Determine the balance in each account (adjusted trial balance) Create and Income Statement, netting revenue and expense Determines the period’s Net Income MOVE all balances from revenue, expense, gains/losses, distributions, to the RETAINED EARNINGS ACCOUNT This “zeroes out” the revenue and expense accounts, preparing for the next period. Prepare the Balance Sheet showing the ending balances

CLOSING THE PERIOD Make all adjusting entries Determine the balance in each account (adjusted trial balance) Create and Income Statement, netting revenue and expense Determines the period’s Net Income MOVE all balances from revenue, expense, gains/losses, distributions, to the RETAINED EARNINGS ACCOUNT This “zeroes out” the revenue and expense accounts, preparing for the next period. Prepare the Balance Sheet showing the ending balances

Entity Principle Period Principle Matching Principle RECOGNIZE REVENUE in the period in which it is earned Period Principle RECOGNIZE EXPENSES in the period in which it is incurred Matching Principle INCOME STATEMENT BALANCE SHEET

Accrued Interest on Loans Supplies Inventory Prepaids (Insurance, Subscriptions, Rent, Utilities advances) Unearned Revenue (advance payment for goods/services to be provided in the future) Accrued Interest on Loans

IN SUMMARY ACCRUAL ACCOUNTING The Balance Sheet MUST show all the RIGHTS AND OBLIGATIONS of the entity as of the closing date, and Revenue and Expenses must be matched to the PERIOD in which they occur, not when they are paid.

HOMEWORK ASSIGNMENT 3 Individual part Group part Complete before Monday.