Accounting for Deferrals
SuperDels Balance Sheet Period Ended 20X7 |
|
Assets |
|
Cash |
$2,100 |
Car |
4,000 |
Less: Accumulated Depreciation |
(700) |
Land |
1,000 |
Total Assets |
6,400 |
|
|
Liabilities |
|
Unearned Revenue |
1,500 |
Total Liabilities |
1,500 |
|
|
Equity |
|
Contributed Capital |
4,400 |
Retained Earnings |
500 |
Total Equity |
4,900 |
|
|
Total Liability and Equity (Claims) |
6,400 |
SuperDels Statement of Cash Flows For the Period Ended 20X7 |
|
Cash Flows from Operating Activities |
|
Cash Receipts from Revenue |
$3,000 |
Cash Payments for Expenses |
(300) |
Net Cash Flow from Operating Activities |
2,700 |
|
|
Cash Flows from Investing Activities |
|
Cash Payment to Purchase Car |
(4,000) |
Cash Payment to Purchase Land |
(1,000) |
Net Cash Flow from Financing Activities |
(5,000) |
|
|
Cash Flows from Financing Activities |
|
Cash Receipts from Contributed Capital |
4,400 |
Net Cash Flow from Financing Activities |
4,400 |
|
|
Net Increase in Cash |
2,100 |
Plus: Beginning Cash Balance |
0 |
|
|
Ending Cash Balance |
$2,100 |
There are two points that should be noted about the financial statements.
First, deferrals, like accruals, cause a difference in the amount of net income and the amount of cash flow from operations ($500 vs. $2,100).
Second, the Car account contains the full, original cost of the asset. The amount of accumulated depreciation is shown right after the Car account in the Accumulated Depreciation account. Accumulated depreciation is subtracted from the asset account to arrive at the carrying (or book) value of the car amounting to $3,300 ($4,000 - $700). When adding up all assets in the balance sheet to calculate total assets, only the carrying values (i.e., original cost less accumulated depreciation) are considered.
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