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Concept explainers
Deferrals:
Deferrals refer to the revenues that are collected in advance before the services are provided or sales are made to the customer, and the expenses are paid in advance before the expenses are incurred.
Deferrals are classified into two types. They are prepaid expenses, and unearned revenues.
Prepaid expenses: The expenses are paid in cash, before they are incurred.
Unearned revenue: The cash is received, before the services are performed.
The expense recognition principle:
The expense recognition principle refers to the expenses that should match with revenue (matching principle) in the period when the company incurred expenses in order to generate the revenue, doesn’t matter, payment is made or not.
To calculate: The amount of supplies purchased during the year.
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Chapter 3 Solutions
Bundle: Accounting, Loose-Leaf Version, 26th + CengageNOWv2, 2 term Printed Access Card
- Financial accountingarrow_forwardGiven the solution and accounting questionarrow_forwardThe following data were selected from the records of Fluwars Company for the year ended December 31, current year: Balances at January 1, current year: Accounts receivable (various customers) $ 111,500Allowance for doubtful accounts 11,200 The company sold merchandise for cash and on open account with credit terms 1/10, n/30, without a right of return. The following transactions occurred during the current year: Sold merchandise for cash, $252,000.Sold merchandise to Abbey Corp; invoice amount, $36,000.Sold merchandise to Brown Company; invoice amount, $47,600.Abbey paid the invoice in (b) within the discount period.Sold merchandise to Cavendish Inc.; invoice amount, $50,000.Collected $113,100 cash from customers for credit sales made during the year, all within the discount periods.Brown paid its account in full within the discount period.Sold merchandise to Decca Corporation; invoice amount, $42,400.Cavendish paid its account in full after the discount…arrow_forward
- Given solution general accountingarrow_forwardanswer plzarrow_forwardThe following data were selected from the records of Fluwars Company for the year ended December 31, current year: Balances at January 1, current year: Accounts receivable (various customers) $ 111,500 Allowance for doubtful accounts 11,200 The company sold merchandise for cash and on open account with credit terms 1/10, n/30, without a right of return. The following transactions occurred during the current year: Sold merchandise for cash, $252,000. Sold merchandise to Abbey Corp; invoice amount, $36,000. Sold merchandise to Brown Company; invoice amount, $47,600. Abbey paid the invoice in (b) within the discount period. Sold merchandise to Cavendish Inc.; invoice amount, $50,000. Collected $113,100 cash from customers for credit sales made during the year, all within the discount periods. Brown paid its account in full within the discount period. Sold merchandise to Decca Corporation; invoice amount, $42,400. Cavendish paid its account in full after the…arrow_forward
- Financial AccountingAccountingISBN:9781337272124Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage LearningCollege Accounting (Book Only): A Career ApproachAccountingISBN:9781337280570Author:Scott, Cathy J.Publisher:South-Western College PubCollege Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,
- Financial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,Century 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:Cengage
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