Академический Документы
Профессиональный Документы
Культура Документы
Financial
Accounting
Concepts
Fourth Edition
by
Edmonds, McNair, Milam, Olds
PowerPoint® presentation by
J. Lawrence Bergin
3- 2
Chapter 3
Accounting
for
Deferrals
What is a deferral?
◆ A deferral event occurs when:
– cash is received before revenue
is earned
or
- cash is paid before an expense
is incurred.
Deferred Expenses:
You’ve paid the cash “up-front” but you haven’t
received the goods or services yet.
Depreciation
◆ The portion of the cost of an
asset allocated to any one
accounting period is called--
DEPRECIATION EXPENSE
◆ Depreciation of an asset is an
allocation process--spreading
the cost of an asset that benefits
more than one accounting
period over the estimated useful
life of the asset.
Example of Depreciation:
✿Income Statement
✿Balance Sheet
✿Income Statement
Deferred Revenue
◆ You’ve received payment for something
you have NOT yet provided.
◆ Revenue is not recognized until the
service is performed or the goods are
delivered...but you have to record the
fact that you have received the cash,
and….
◆ A related LIABILITY (Unearned
Revenue) must be recorded and kept on
the books until you EARN the revenue.
Record the following nine transactions for the year ended 12/31/04.
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003
3- 23
Salary Expense
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003
3- 32
McGraw-Hill/Irwin
Service Revenue © The McGraw-Hill Companies, Inc., 2003
3- 38
McGraw-Hill/Irwin
Depreciation Expense © The McGraw-Hill Companies, Inc., 2003
3- 41
Rent Expense
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003
3- 43
Less: Dividends
Ending Retained Earnings
$
Total Stockholders’ Equity
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003
3- 49
Bob Company, Inc.
Statement of Changes in Stockholders’ Equity
For the Year Ended December 31, 2004
Beginning Common Stock $ 7,000
Plus: Common Stock issued 0
Ending Commonn Stock $ 7,000
Assets Liabilities
Cash $ Accounts Payable $
Acct. Receivable Unearned Revenue
Total Liabilities $
Prepaid rent
Prop., Plant & Eq.
Stockholders’ Equity
Off. Equip. $ Common Stock $
Accum. Depr. Retained Earnings
Off. Eq., net Total Stkhld. Eq. $
Total Assets $ Total Liab. & S.E. $
2. A basis of comparison.
a. Our past: (Are we getting better?)
b. Our budget: (Did we meet expectations?)
c. Our competitors: Who is better? Why?
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003
3- 59
Analysis of Financial Statements
Using Ratios (Data from Bob Co.)
◆ Return on assets
Net income $ %
= =
Total assets $
◆ Debt to assets
Total debt (Liabilities) $ %
= =
Total assets $
◆ Return on equity
Net income $ %
= =
Stockholders’ Equity $
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003
3- 60
Analysis of Financial Statements
Using Ratios (Data from Bob Co.)
◆ Return on assets
Net income $ 4,000 21.1%
= =
Total assets $19,000
◆ Debt to assets
Total debt (Liabilities) $ 6,000 31.6%
= =
Total assets $19,000
◆ Return on equity
Net income $ 4,000 30.8%
= =
Stockholders’ Equity $13,000
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003
3- 61
Chapter 3:
Financial
Accounting
The End
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003