Day 33: Accruals and Deferrals

Preview chapter 3 by watching the videos online

• #1 Accrual and Cash Basis Accounting (4:02)
• #2 Prepaid Expenses (5:59)
• #3 Depreciation (6:53)

some accounts need to be "brought up to date" at the end of an accounting cycle

• some expenses incurred as time goes by,
  not efficient to account for them as they are used:
• Prepaid Expenses (deferred expenses - assets)
• supplies
• inventories
• prepaid advertising
• prepaid insurance
• prepaid rent
• Depreciation
• Interest Expense
• some expenses are incurred before they are paid:
• Accrued Expenses (payables - liabilities)
• wages payable
• salaries payable
• taxes payable
• interest payable
• some revenues are earned over time,
  but paid for in advance:
• Unearned Revenues (deferred revenues - liabilities)
• unearned rental fees
• unearned subscription fees
• unearned service fees
• some revenues are earned before payment is received:
• Accrued Revenues (receivables - assets)
• sales on account
• interest income