· Liability Account: 23’000 Accrued expense and deferred income, (provisions)
Accrued expense is recognized before cash is paid, income is recognized after cash is
received. Accrued expenses are the opposite of prepaid expenses. Periodic expenses such as wages, interest
and taxes that even though they are to be paid at some future date, they are recognized or accrued on the
balance sheet once you can reasonably expect their payment and until the time they are paid. Deferred
income is a liability because it refers to revenue that has not yet been earned, but represents products or
services that are owed to the customer. As the product or service is delivered over time, it is recognized as
revenue on the income statement.
c. Accruals and deferrals
· Accrual is the recognition of revenue and expenses before cash is received or paid
· Deferral is the recognition of revenue and expenses after cash is received or paid
This relates to 4 types of timing differences:
1. Accrued Revenue: Revenue is recognized before cash is received.
2. Accrued Expense: Expense is recognized before cash is paid.
3. Deferred Revenue: Revenue is recognized after cash is received.
4. Deferred Expense: Expense is recognized after cash is paid.
· Liability Account: 23’000 Accrued expense and deferred income, (provisions)
Accrued expense is recognized before cash is paid, income is recognized after cash is
received. Accrued expenses are the opposite of prepaid expenses. Periodic expenses such as wages, interest
and taxes that even though they are to be paid at some future date, they are recognized or accrued on the
balance sheet once you can reasonably expect their payment and until the time they are paid. Deferred
income is a liability because it refers to revenue that has not yet been earned, but represents products or
services that are owed to the customer. As the product or service is delivered over time, it is recognized as
revenue on the income statement.
c. Accruals and deferrals
· Accrual is the recognition of revenue and expenses before cash is received or paid
· Deferral is the recognition of revenue and expenses after cash is received or paid
This relates to 4 types of timing differences:
1. Accrued Revenue: Revenue is recognized before cash is received.
2. Accrued Expense: Expense is recognized before cash is paid.
3. Deferred Revenue: Revenue is recognized after cash is received.
4. Deferred Expense: Expense is recognized after cash is paid.
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