Accounting Cycles
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- Date Submitted: 11/27/2011 06:40 AM
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2011
Accounting Cycles
There are a great many number of details that the accountant must consider when recording entries in order to keep account information complete, and most importantly accurate.
One such process that helps us to make sure financial data is consistent and correct is that of adjusting journal entries. In a nutshell adjusted journal entries are entries made when a company incurs an expense that has not been recorded, or earns revenue that has yet to be recorded; furthermore these adjusted entries will always one account in the income statement and one account that resides in the balance sheet. Where adjusted journal entries are concerned there are four types.
Unearned game revenue |
| 1800 |
| 1800 |
The first type - deferred revenue- would be defined as earnings a company receives before providing a service. Suppose 30 customers purchase reservations for Capcoms upcoming release Street Fighter x Tekken deciding to pay for the game in its entirety; Capcom records a cash revenue to the tune of about $1800 in the developers account, but the customers have yet to receive the actual product which is likely six months or more away. Until the game is released and those 30 customers have the game in their PS3s or Xbox360s Capcom must record this deferred revenue as a liability.
cash |
1800 | |
1800 | |
Game revenue |
| 0 |
| 0 |
Notice the "Game revenue" table remains at zero as the money does not quite belong to the developer yet. When this changes we will see a deduction from the "unearned game revenue" table and 1800 will be added to our revenue section.
The next type of adjustment is the accrued revenue; this is when revenue is recorded before actually receiving cash. A dealerships service department provides a good example of this type of revenue; when a dealer diagnoses a car, a service price is quoted and then billed to the customer once the vehicle repairs are finished. If it costs my $1500 to have...
Accounting Cycles
There are a great many number of details that the accountant must consider when recording entries in order to keep account information complete, and most importantly accurate.
One such process that helps us to make sure financial data is consistent and correct is that of adjusting journal entries. In a nutshell adjusted journal entries are entries made when a company incurs an expense that has not been recorded, or earns revenue that has yet to be recorded; furthermore these adjusted entries will always one account in the income statement and one account that resides in the balance sheet. Where adjusted journal entries are concerned there are four types.
Unearned game revenue |
| 1800 |
| 1800 |
The first type - deferred revenue- would be defined as earnings a company receives before providing a service. Suppose 30 customers purchase reservations for Capcoms upcoming release Street Fighter x Tekken deciding to pay for the game in its entirety; Capcom records a cash revenue to the tune of about $1800 in the developers account, but the customers have yet to receive the actual product which is likely six months or more away. Until the game is released and those 30 customers have the game in their PS3s or Xbox360s Capcom must record this deferred revenue as a liability.
cash |
1800 | |
1800 | |
Game revenue |
| 0 |
| 0 |
Notice the "Game revenue" table remains at zero as the money does not quite belong to the developer yet. When this changes we will see a deduction from the "unearned game revenue" table and 1800 will be added to our revenue section.
The next type of adjustment is the accrued revenue; this is when revenue is recorded before actually receiving cash. A dealerships service department provides a good example of this type of revenue; when a dealer diagnoses a car, a service price is quoted and then billed to the customer once the vehicle repairs are finished. If it costs my $1500 to have...