Online Accounting Course Simple Studies

Accounting Solution 3.1 (Accounting for Deferrals)

Look at the table below:

No

Assets

=

Liabilities

+

Equity

Rev.

-

Exp.

=

Net
Inc.

Cash
Flows

Cash

+

Acc.
Rec.

+

 Prp.
Rent

=

 Acc.
Pay.

+

Un.
Rev.

+

Cont.
Cap.

+

Ret.
Earn.

1

6,000

+

   n/a  

+

  n/a   

=

   n/a   

+

   n/a   

+

6,000

+

  n/a  

  n/a 

-

 n/a 

=

  n/a  

6,000

FA

2

2,300

+

n/a

+

n/a

=

n/a

+

n/a

+

n/a

+

2,300

2,300

-

n/a

=

2,300

2,300

OA

3

n/a

+

3,500

+

n/a

=

n/a

+

n/a

+

n/a

+

3,500

3,500

-

n/a

=

3,500

n/a

n/a

4

2,000

+

(2,000)

+

n/a

=

n/a

+

n/a

+

n/a

+

n/a

n/a

-

n/a

=

n/a

2,000

OA

5

4,800

+

n/a

+

n/a

=

n/a

+

4,800

+

n/a

+

n/a

n/a

-

n/a

=

n/a

4,800

OA

6

(1,000)

+

n/a

+

n/a

=

n/a

+

n/a

+

n/a

+

(1,000)

n/a

-

1,000

=

(1,000)

(1,000)

OA

7

n/a

+

n/a

+

n/a

=

1,400

+

n/a

+

n/a

+

(1,400)

n/a

-

1,400

=

(1,400)

n/a

n/a

8

(1,200)

+

n/a

+

n/a

=

(1,200)

+

n/a

+

n/a

+

n/a

n/a

-

n/a

=

n/a

(1,200)

OA

9

(3,600)

+

n/a

+

3,600

=

n/a

+

n/a

+

n/a

+

n/a

n/a

-

n/a

=

n/a

(3,600)

OA

10

n/a

+

n/a

+

n/a

=

n/a

+

(1,600)

+

n/a

+

1,600

1,600

-

n/a

=

1,600

n/a

n/a

11

n/a

+

n/a

+

(1,200)

=

n/a

+

n/a

+

n/a

+

(1,200)

n/a

-

1,200

=

(1,200)

n/a

n/a

Ttl

9,300

+

1,500

+

2,400

=

200

+

3,200

+

6,000

+

3,800

7,400

-

3,600

=

3,800

9,300

 

Note that in Event No.10 we did not recognize the entire revenue amount. Why? Because only part of services had been performed by December 31, and the other part remained to be provided in 20X9. The revenues recorded at the end of 20X8 are calculated as follows: $4,800 x (4 months / 12) = $1,600.

The same is true for the prepaid rent. We recognized only part of it in amount of $3,600 x (4 months / 12) = $1,200.