1. ACG 2021 Chapter 3 Summary

2. Two methods of Accounting Cash Accrual ▫Time-Period Concept  Revenue Recognition Principle  Matching Concept

3. Two types of Accrual Accounting Accruals ▫Transactions recorded before Cash exchanged Deferrals ▫Transactions recorded before Revenue/Expense is Earned/Incurred

4. Deferrals Initial Transaction ▫We Receive Cash in Advance  Cash xxxx  Unearned Service Revenue xxxx ▫We pay Cash in Advance  Ppd Asset xxxx  Cash xxxxx Subsequent(Adjusting) Transaction ▫Provide Service or Goods (Earn Revenue)  Unearned Revenue xxxx  Service Revenuexxxxx ▫Use up Prepaid Asset  Expense xxxxx  Ppd Assetxxxxx Balance Sheet Accounts Balance Sheet and Income Statement Revenue Recognition Matching Concept

5. Revenue Recognition Matching Concept Accruals Initial Transaction ▫Incurred an Expense before paying for it  Expense xxxxx  Payable xxxxx ▫We earn Revenue before receiving cash  Receivable xxxxx  Revenuexxxxx Subsequent(Adjusting) Transaction Pay for Expense previously incurred ▫Payable xxxx  Cashxxxx ▫Receive Cash Owed to us  Cash xxxxx  Receivable xxxxx B/S & I/S B/S only

6. Closing The Accounts Permanent Accounts ▫B/S Temporary Accounts ▫Income Statement  Revenues closed to Retained Earnings  Revenue xxxx ▫Retained Earnings xxxx  Expenses closed to Retained Earnings ▫Retained Earnings xxxx ▫Expensesxxxx

7. Ratios Current ▫Current Assets / Current Liabilities Debt ▫Total Liabilities / Total Assets