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  • Accounting Is Timing: Cash After Cash Before T 0 1 2 T 0 1 2

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    Pavan Kalyan Kola
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    The document discusses accounting concepts related to timing of revenue and expense recognition. It explains that accounting can defer or accrue revenue and expenses, creating assets or liabilities on the balance sheet. For revenue, accounting defers revenue when cash is received before revenue is recognized, and accrues revenue when revenue is recognized before cash is received. Similarly, for expenses accounting defers expenses when cash is paid before the expense is recognized, and accrues expenses when the expense is recognized before cash is paid. Examples are provided for deferred and accrued revenue and expenses.

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    accrual cash flows

    Original Title

    Accrual Cash Flows

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    The document discusses accounting concepts related to timing of revenue and expense recognition. It explains that accounting can defer or accrue revenue and expenses, creating assets or liabilities on the balance sheet. For revenue, accounting defers revenue when cash is received before revenue is recognized, and accrues revenue when revenue is recognized before cash is received. Similarly, for expenses accounting defers expenses when cash is paid before the expense is recognized, and accrues expenses when the expense is recognized before cash is paid. Examples are provided for deferred and accrued revenue and expenses.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    4 views1 page

    Accounting Is Timing: Cash After Cash Before T 0 1 2 T 0 1 2

    Uploaded by

    Pavan Kalyan Kola
    The document discusses accounting concepts related to timing of revenue and expense recognition. It explains that accounting can defer or accrue revenue and expenses, creating assets or liabilities on the balance sheet. For revenue, accounting defers revenue when cash is received before revenue is recognized, and accrues revenue when revenue is recognized before cash is received. Similarly, for expenses accounting defers expenses when cash is paid before the expense is recognized, and accrues expenses when the expense is recognized before cash is paid. Examples are provided for deferred and accrued revenue and expenses.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 1

    Accounting is Timing

    Cash Before  Cash After

    t=0 1 2 t=0 1 2
    Get Cash Recog. Revenue Recog. Revenue Get Cash
    Revenue

    • Deferred Revenue • Accrued Asset
    • Creates a Liability First • Creates an Asset First
    • Reduces the Liability Later When  • Reduces the Asset Later When you 
    You Recognize Revenue Get Cash (and increase cash)
    • Examples, Sell Gift Cards, Pre‐paid  • Example, Accounts Receivable 
    services, Pre‐paid insurance

    t = 0 1 2 t=0 1 2
    Pay Cash Recog. Expense Recog. Expense Pay Cash

    • Deferred Expense  • Accrued Liability
    • Creates an Asset first • Creates A Liability First
    Expense

    • Reduces the Asset Later When you  • Reduces the Liability Later When 
    Recognize Expense you Pay Cash (and reduce cash)
    • Examples, Buy Pre Paid Insurance,  • Examples, Accounts Payable, Wages 
    Supplies, Equipment, Buildings   Payable, Taxes Payable, Interest 
    Payable, 

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